What is West Texas Intermediate ?
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West Texas Intermediate (WTI) is a grade of crude oil and one of the main three benchmarks in oil pricing, along with Brent and Dubai Crude. WTI is considered a high-quality oil that is relatively easy to refine.WTI is known as a light sweet oil. It contains less than 0.50% sulfur, whereas the norm is about 0.24% to 0.34%, making it "sweet." It also has a low density, making it "light."WTI is the underlying commodity of the New York Mercantile Exchange's (NYMEX) oil futures contract.
Definition
West Texas Intermediate (WTI) is a grade of crude oil and is one of the three major benchmarks for oil prices, alongside Brent Crude and Dubai Crude. WTI is considered a high-quality, relatively easy-to-refine crude oil.
Origin
WTI crude oil derives its name from its primary production area in West Texas, USA. It became a global oil market benchmark in the mid-20th century, with its importance increasing as U.S. oil production and exports grew.
Categories and Features
WTI is known as a light, sweet crude oil. Its sulfur content is below 0.50%, with standard content ranging from about 0.24% to 0.34%, hence it is called "sweet." Its low density makes it "light." WTI is the underlying commodity for the New York Mercantile Exchange (NYMEX) crude oil futures contracts.
Case Studies
A notable case occurred in April 2020, when due to the COVID-19 pandemic's drastic demand drop, WTI crude oil futures prices fell to negative for the first time, reaching -$37.63 per barrel. This event highlighted the significant impact of market supply-demand imbalances on oil prices. Another case is during the 2008 financial crisis when WTI crude prices soared to $147 per barrel, only to plummet due to the global economic downturn.
Common Issues
Investors trading WTI crude oil often face issues such as high market volatility, significant price influence from geopolitical events, and delivery issues upon futures contract expiration. A common misconception is that WTI prices are always higher than other crude benchmarks, but in reality, price differences depend on market conditions and supply-demand relationships.
