What is Brent and WTI oil?

WTI stands for West Texas Intermediate. It is a grade of crude oil used to benchmarking oil price. The oil is quite light, low density and low sulfur content (sweet). The API gravity is around 39.6 with sulfur content around 0.24%. WTI oil is lighter and sweeter than Brent crude.

WTI crude is sourced from U.S oil fields, primarily in Texas, Luisana and North Dakota. Brent crude is from North sea whereby it is a combination of crude oil from 15 different oil fields in North sea.

The similarity between WTI and Brent is both crude are light and sweet making easy to 
refine it for gasoline, diesel fuel and other products.

Since WTI crude is produced onshore, it has high transportation cost as opposed to Brent crude whereby it is produced near the sea. In recent years, with the new technology advancements i.e fracking in shale oil and drilling, WTI crude has become cheaper than Brent. See Figure 1 graph (2011-2013).

 Figure 1: Historical Brent vs WTI crude price

Majority of the crude contracts used Brent crude as a benchmark pricing. Since the oil supply is water bourne, it is easier to transport to distant locations. i.e after oil is extracted, it was transported to a floating vessel near oil platform (FPSO) where it can be produced and stored. Later oil can be offloaded from FPSO to oil tankers and transported worldwide. 

Figure 2: WTI and Brent comprisons

WTI is traded at New York Mercantile Exchange (NYMEX) whereby Brent is traded at ICE Futire Europe, London. 

Oil crudes price are highly influenced by geopolitical situations. See Figure 3.

Figure 3: Oil prices vs geopolitical situations