Although there are three primary oil benchmarks, Brent crude and WTI are the most popular in the world. Benchmarks serve as a reference price for buyers and sellers of crude oil. It is usually referred to as the price of oil. Brent and WTI may be oil benchmarks but they contrast on essentialities. One of the essential differences is in the prices of the products. Both products usually have different prices. The price difference is usually referred to as the Brent-WTI spread. While the two crude oil varieties can trade at similar price points, each has its own unique supply and demand market, and therefore its price reflects its individual market fundamentals.
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West Texas Intermediate (WTI)
WTI is considered as the highest-quality light sweet crude available. It is, however, not the most used oil. West Texas Intermediate is the preferred measure in United States.This could be because West Texas Intermediate is sourced from U.S. oil fields, primarily in Texas, Louisiana and North Dakota. It is produced, refined, and consumed in North America. It is also partially due to an export ban on U.S. crude oil, which was reversed in late 2015. Even though exports of WTI can now occur, transporting WTI overseas to Brent crude’s market could come at a cost that would make WTI unable to compete with Brent crude in terms of pricing. WTI is considered a “sweet” crude because it is about 0.24% sulfur, which is a lower concentration than North Sea Brent crude. Both Brent Crude and West Texas Intermediate are light and sweet, making them ideal for refining into gasoline.
Brent crude is considered the most used oil. It has this advantage because of some distinct reasons. Brent Crude originates from oil fields in the North Sea which makes it easily transported to other parts of the world as costs are significantly lower. As a benchmark, most oil is priced using Brent Crude for trading. WTI, due to recent developments, became cheaper than Brent in recent years. Prior to this, Brent Crude tended to be cheaper than West Texas Crude.