WTI is West Texas Intermediate oil. It describes a light oil with relatively low sulfur. While it might be produced in West Texas, the WTI designation can be designated to any crude that can meet the criteria of being a light sweet crude with the “light” aspect being defined as API 41 gravity and a sulfur content of approximately 0.4%, which would make it “sweet.”
WTI is the crude that is the basis for the crude contract on the NYMEX division of the CME. The delivery point for that crude is not actually in Texas; it is at the pipeline and tank gathering point of Cushing, Oklahoma. Crudes that meet the basic specifications of WTI can be delivered into the contract even if they are not produced in West Texas.
WTI was the first actively-traded crude contract, launched on NYMEX in 1983. It was considered the key benchmark for many years until it was displaced gradually by the Brent contract on what is now ICE. WTI fell far out of favor when the inability to get crude out of Cushing to the Gulf of Mexico became a serious problem. It value against Brent plummeted. However, new pipeline projects have eased that issue but Brent is still considered the global benchmark.
Brent crude was initially a term that referred to oil coming out of the Brent field in the U.K. sector of the North Sea. While that is still one of its definitions, it now encompasses a variety of North Sea crudes–Oseberg, Forties, Ekofisk and Brent–deliverable against a Brent contract obligation. As it is a waterborne crude and can move anywhere, it is considered the global crude benchmark. The Platts assessment for Dated Brent–a physical cargo to be loaded at a certain designated date–is the world’s crude benchmark.
Brent crude is slightly lighter than WTI. Its sulfur content can be higher or lower depending upon the grade in question. Forties, for example, has more sulfur than WTI.
The Brent/WTI spread is relevant for several reasons. One of the key ones is whether its width–with Brent higher than WTI–is enough to incentivize moving crude out of Canada or the Midcontinent to the East Coast or Gulf Coast for export or processing. WTI crude or crude priced off WTI will need to compete with crudes priced closer to Brent on the coasts. The movement of crude by rail is highly dependent upon the size of the spread.
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