Oil prices: Brent or WTI?

The world oil market is dominated by two indices: Brent, North Sea oil, and WTI, West Texas Intermediate, produced in Texas, Louisiana and North Dakota. Brent is the benchmark for around two-thirds of the world market (Europe, Africa and the Middle East).

WTI and Brent are very high quality " light sweet crude oil ", i.e. light with low sulfur content. They are easy to refine and therefore highly sought-after.

The two indices essentially move together. However, the difference between the two, the " spread ", is explained by technical reasons and expectations of supply and demand, which may differ on the two markets. Brent is more exposed to geopolitical conditions than WTI, which is purely "domestic". For example, the risk of closure of the Suez Canal during the Arab Spring has widened the spread. WTI, on the other hand, is more directly impacted by the shale revolution: US oil production, whose decline is constantly being predicted, continues to surprise with its resilience, despite falling prices [why is US production still going strong?] Supply therefore continues to exert downward pressure on prices, more so on WTI than on Brent. Moreover, as WTI is essentially an onshore oil, it is more subject to physical constraints (transport and storage) than Brent, a seaborne oil. A tanker can easily be brought on site, increasing storage capacity. On land, tank construction is costly and time-consuming.

	Brent and WTI prices are highly correlated. The price of Brent has been slightly higher than that of WTI for several years (this has not always been the case historically).


The Brent-WTI spread has been trending positive since 2015, although it occasionally ventured into negative territory in 2017 and 2018. On April 20, 2020, with WTI negative and Brent remaining positive, the spread soared. From around $10 in 2019, it rose to over $54. [Back to main article: Understanding the negative price of oil]

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