Module 3: Trading oil · Lesson 7 of 9

Brent vs WTI

3 min read

Brent and WTI are the two most widely followed crude oil benchmarks. Brent is based mainly on oil from the North Sea and is used to price much of the world's crude, while WTI, or West Texas Intermediate, is the main US benchmark.

What a benchmark is

Crude oil comes in many grades from many places. A benchmark is a reference grade that buyers and sellers use as a starting point, pricing other oils at a premium or discount to it. When news reports say "oil rose today", they usually mean Brent or WTI.

Brent

Based on a basket of crude grades delivered in North West Europe, mostly from North Sea fields between the UK and Norway.
A waterborne crude, shipped by tanker, which makes it easy to transport worldwide.
Widely used as the reference for oil traded internationally, including in Europe, Africa and parts of Asia.

WTI

Produced in the United States.
Its futures contract is priced for delivery at Cushing, Oklahoma, a major inland storage and pipeline hub.
Slightly lighter and lower in sulphur than Brent, which makes it a little easier to refine into fuels such as petrol.

Why the prices differ

The gap between the two prices is called the Brent-WTI spread (not to be confused with a broker's bid-ask spread). It changes with transport costs, US production and storage levels, export conditions and regional demand. Brent has often traded above WTI, but the size of the gap varies and it has occasionally reversed.

Example: Suppose Brent is 84.00 and WTI is 80.50. The Brent-WTI spread is 3.50 dollars per barrel. If US storage at Cushing fills up, WTI could weaken and the spread might widen to, say, 5.00. Figures are illustrative.

On your trading platform

Brokers often label these CFDs as "UKOIL" or "Brent" and "USOIL" or "WTI", though names vary. They usually move in the same direction, but not always by the same amount. Check the contract size, trading hours and rollover dates for each, as they can differ.

Risk: Treating Brent and WTI as interchangeable can cause surprises. Their trading hours, spreads and reactions to US-specific news may differ.

Key takeaways

Brent is a North Sea benchmark used widely for international oil prices.
WTI is the main US benchmark, priced for delivery at Cushing, Oklahoma.
The Brent-WTI spread changes with transport, storage and regional supply and demand.
Check each CFD's specs separately, as they can differ by broker.

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Educational content only — not investment advice. Leveraged trading carries a high risk of loss.