In the world of crude oil, there are two globally accepted main players. WTI (West Texas Intermediate) Crude and Brent Crude oil. Over the years, these two oil types have influenced the world in more ways than we could even begin to list. In fact, crude oil is the world’s most traded commodity, with around 100 million barrels of the stuff being traded, on average, every single day. The differences between these two types of crude extend beyond simply that of their composition and prices, and truly knowing the nuances of each type requires a great deal of industry experience and knowledge. The team here at TriStone Holdings, a rapidly developing UK oil and gas investment company, wanted to look at these differences in a bit more detail.
Let’s start with the major factor, of what component parts do the two types comprise. WTI Crude has a much lower sulphur content than its Brent counterpart. In terms of percentage composition, WTI has a sulphur content of around 0.24%, whilst Brent has a higher (though still relatively low) sulphur content of 0.37%. Both types of crude can be classified as ‘sweet crude oil’. Sweet crude oil is defined by the New York Mercantile Exchange as crude oil with a sulphur content lower than 0.5%.
Where Are The Two Types Extracted?
West Texas Intermediate Crude is extracted from the oil fields of the USA. Roughly 3 million barrels per day of WTI crude were produced in major West Texas oil fields. Brent Crude, by comparison, is extracted from oil fields in the North Sea. This particular type of oil actually refers to a mixture of crude from five North Sea oil fields (including Brent). The other four are:
- Forties (East of Aberdeen, Scotland)
- Ekofisk (South-West of Stavanger, Norway)
- Troll (West of Bergen, Norway)
- Oseberg (North-West of Bergen, Norway)
Oil from these fields collectively forms ‘Brent’ crude under something known as the BFOET benchmark. WTI hinges less on other countries/consortiums than Brent does, and as such, isn’t as influenced by geopolitics. Brent, for example, is highly influenced by OPEC (Organization of the Petroleum Exporting Countries).
Where Are They Traded?
The two different types of crude are also traded on separate markets. West Texas Intermediate (WTI) is traded on the New York Mercantile Exchange whilst Brent is traded on London’s Intercontinental Exchange (ICE).
In terms of trade price, Brent is more expensive than WTI – the difference between the two prices, which varies day to day, is known as the WTI vs. Brent Spread.
Other Major Benchmarks
Whilst WTI and Brent may be the two most commonly known crude benchmarks, they’re not the only ones. Some other major oil benchmarks worth knowing about include:
- Dubai Crude (aka Fateh, is a heavy sour crude oil)
- Edmonton Par (Canada)
- Western Canadian Select (Canada)
- Murban Crude (Abu Dhabi)
- Urals Oil (Russia)
These benchmarks, along with WTI and Brent, serve as reference pricing points for buyers and sellers of crude oils. They collectively have a huge impact and role to play within the global oil industry.
Both WTI and Brent have taken a hit, thanks to the recent global pandemic, but then again, the whole O&G sector has been badly affected, and not just crude. The oil industry has weathered a huge number of storms in the past, however, and there’s no reason why there shouldn’t be a similarly strong resurgence going into the future as economies work their way back to some semblance of normality. Indeed, WTI markets and production have already shown relatively signs of recovery, as has Brent (though to a more hesitant extent). In short, demand is returning to normal levels at a much more rapid rate than may have initially been feared back in March and April, which is encouraging news, indeed.
To the layperson, oil probably seems like one homogeneous mass of a commodity – oil is oil and nothing much beyond that. This couldn’t be further from the truth, however, and in reality, there are a vast number of differences between types of crude (which, it’s worth adding, extend well beyond just the types of benchmarks that we’ve talked about here).
So, if you’d like to find out more about the different types of crude, our oil and gas investment company or our portfolio and acquisitions, which focus on the Cherokee Basin (specifically Coffey County), then get in touch! Contact TriStone Holdings Ltd today on 0800 055 7079. You can also take a look at out our company Facebook page here!