What is West Texas Intermediate (WTI)?
West Texas Intermediate (WTI) is a premier grade of crude oil, renowned for its high quality and ease of refinement. As one of the primary benchmarks in oil pricing, alongside Brent and Dubai Crude, WTI holds a prominent position in global energy markets.
WTI is identified as a light sweet oil, characterized by its low sulfur content—below 0.50%, typically around 0.24% to 0.34%—and its lower density, making it exceptionally light. These qualities make WTI highly sought after for refining processes.
Moreover, WTI is the underlying commodity for the New York Mercantile Exchange’s (NYMEX) oil futures contracts, which are pivotal in energy trading.
Key Highlights
- Global Benchmark: West Texas Intermediate (WTI) is a light, sweet crude oil and serves as one of the main oil benchmarks globally.
- Sourced in Texas: Primarily sourced from inland Texas, WTI is one of the highest-quality oils in the world.
- NYMEX Futures: WTI underpins the NYMEX oil futures contracts, making it integral to commodity trading.
- Comparison with Brent: WTI is frequently compared to Brent crude, which serves as the benchmark for two-thirds of the world’s oil contracts.
Dive Deeper: The Essence of WTI
WTI is the leading oil benchmark for North America due to its U.S. origins, predominantly from the vast Permian Basin. From there, it travels through pipelines to refineries in the Midwest and Gulf of Mexico.
Cushing, Oklahoma: The Hub of Oil Distribution
The primary delivery point for the physical exchange and price settlement of WTI is Cushing, Oklahoma—familiarly known as “The Pipeline Crossroads of the World.” This hub, exemplified by its intricate network of pipelines and storage terminals, is essential for maintaining flow and flexibility in the oil market:
- Pipelines: 35 pipelines stream through Cushing, with 20 inbound and 15 outbound.
- Storage: 16 terminals with an incredible capacity of 90 million barrels.
- Capacity: Boasts an inbound and outbound capacity of 6.5 million barrels per day.
WTI in the Global Oil Market
Oil benchmarks are essential, providing a reliable pricing reference for global buyers and sellers of crude oil. WTI, alongside Brent, reigns supreme in this domain. Despite Brent accounting for a larger share globally, WTI’s superior oil quality positions it as an essential benchmark.
WTI vs. Brent: A Quality Comparison
- Sulfur Content: WTI sulfur content ranges between 0.24% and 0.34%, whereas Brent ranges from 0.35% to 0.40%. A sulfur content below 0.5% is deemed sweet and plain sailing to refine.
- Price Factors: Despite WTI’s superior quality, its market price is influenced by unique supply-demand dynamics, additional U.S. production from the shale boom, and international transport costs.
U.S. Oil Trade Dynamics
The United States stands out as a net exporter of petroleum products:
- 2023 Statistics: The U.S. imported 8.51 million barrels per day and exported 10.15 million barrels per day.
- Major Importers: The top import sources are Canada, Mexico, Saudi Arabia, Iraq, and Brazil.
- Comprehensive Trade: Encompasses crude oil, hydrocarbon gas liquids, refined petroleum products, and biofuels.
Defining Crude Oil, Petroleum, and Their Derivatives
Crude Oil
A liquid mixture of hydrocarbons found underground, extracted and refined into fuel and various products.
Petroleum Products
These are refined outputs from crude oil and other liquids, handled through complex refining processes.
Broad Term: Petroleum
It encompasses both crude oil and its refined derivatives, forming a base for a myriad of industrial and energy products.
The Bottom Line
West Texas Intermediate stands out as premium-quality crude oil originating from West Texas. It holds significant weight as a U.S. benchmark and a critical marker in global oil trading. When crude oil prices are cited, they often pertain to West Texas Intermediate, underscoring its central role in the energy market.
Related Terms: Brent Crude, Dubai Crude, sweet crude, Oil Futures, Cushing Hub.
References
- McKinsey & Company. “WTI”.
- FocusEconomics. “What Is the Difference Between WTI and Brent Crude Oil?”
- RBN Energy. “Cushing, Oklahoma Crude Oil Infrastructure Map”.
- Purple Trading. “WTI Oil – Definition and Characteristics”.
- Charles Schwab. “Energy Investing Basics: WTI vs. Brent Crude Oil”.
- ExxonMobile. “Crude Oil Blends by API Gravity and By Sulfur Content”.
- U.S. Energy Administration. “How much petroleum does the United States import and export?”
- U.S. Energy Administration. “How much petroleum does the United States import and export?”
- U.S. Energy Administration. “What is the difference between crude oil, petroleum products, and petroleum?”
