When we're talking about oil prices, we see these two terms in the news a lot: WTI and Brent Crude. What do they mean - and what's the difference between the two?
Not all crude oil is created equal - different API gravity (an indication of the ability of the crude to make gasoline) and sulfur content, for example, affect the grade and classification of crude oil. WTI (an acronym for "West Texas Intermediate") and Brent Crude are two different classifications of crude oil.
|WTI Crude Oil||Brent Crude Oil|
WTI and Brent crude are considered the two barometers of global oil pricing. Historically, due to its higher quality, WTI has been priced higher than Brent. But in the past few months, Brent has been the pricier crude. At the moment of writing, WTI is going for $88.14/barrel and Brent is up to $115.34/barrel.
We field a lot of the questions about the price differential (or "spread) between these two forms of crude oil. The price fluctuations between WTI and Brent are affected by a number of factors - the US and global economies, oil inventory, supply and demand in the U.S. and Northern Europe, pipeline vs. tanker oil delivery systems, as well as geopolitical unrest in the Middle East and North Africa. As you can see in this Sept 16 article from Bloomberg.com, there are currently several variables affecting the price of crude, from the weather to the financial situation in Greece.
The next logical question might be "What is the relationship between the price of crude oil and the price of gas?" Sometimes, when the price of crude oil fluctuates, the price of gas does not - and vice versa.
For more about the relationship between crude oil and gas prices, check out this previous PumpTalk post entitled Gas Prices & Crude Oil: An Up and Down Relationship (the article is from 2008 but the principles remain the same!).
There is also a great article on the Globe and Mail: Why gasoline prices don't follow oil prices.
- Erin F.