Understanding Crude Oil Market
- Crude oil is one of the most highly traded commodities in the world and a major source of the global energy supply.
- Brent North Sea crude and West Texas Intermediate crude are the two most heavily traded crude oil grades in the world.
- Both Brent and WTI crude serve as pricing benchmarks for major portions of the global oil supply.
- Crude oil prices are affected by many factors, including weather, geopolitical events, supply-and-demand balance, wars and more.
The most heavily traded grades are Brent North Sea crude (commonly known as “Brent crude”) and West Texas Intermediate (commonly known as “WTI”). Brent is oil that is produced in the Brent oil fields and other sites in the North Sea.
Brent crude’s price is the benchmark for African, European, and Middle Eastern crude oil. The pricing mechanism for Brent dictates the value of roughly two-thirds of the world’s crude oil production.
The percentage of sulfur in crude oil determines the amount of processing needed to refine the oil into energy products. “Sweet crude” is crude oil that has less than 1% sulfur.
The sulfur content of both Brent and WTI is well under 1%, making them both “sweet.” These types are also less dense (“lighter”) than many of the crude oils extracted elsewhere. Both of these characteristics make them easier to refine and more attractive to petroleum product producers.
