WTI vs. Brent: How Oil Prices Work
Two benchmarks set the price of most of the world's crude. Learn what each one measures, why they differ, and the reports traders watch every week.
Key takeaways
- WTI is the US benchmark, priced for delivery at Cushing, Oklahoma. Brent is the international benchmark, based on North Sea crude.
- Both are quoted in US dollars per barrel. One barrel is 42 US gallons.
- Supply decisions by OPEC+, US shale output, inventories and global demand drive prices.
- The EIA's weekly inventory report, usually out Wednesday mornings, regularly moves the market.
Two benchmarks, two places
West Texas Intermediate (WTI) is a light, low-sulfur ("sweet") crude. Its main futures contract trades on NYMEX, part of CME Group, and each contract covers 1,000 barrels delivered at the storage hub in Cushing, Oklahoma. Because it is landlocked, WTI reflects conditions in the US interior: pipeline capacity, local storage and US production.
Brent is a blend of crudes from the North Sea and, more recently, includes US WTI Midland cargoes delivered into Europe. Its futures trade on ICE Futures Europe. Brent is seaborne, so it reacts to tanker routes, Middle East supply and demand in Europe and Asia. Many international crude contracts are priced off Brent.
Why the two prices differ
Brent usually trades a few dollars above WTI. The gap, called the Brent-WTI spread, reflects transport cost to get US crude to the coast and onto ships, differences in quality, and regional supply and demand. When US pipelines are full or Cushing storage swells, WTI can fall further behind. When export capacity is ample, the spread narrows.
What moves oil prices
Supply
- OPEC+ decisions. The group of OPEC members and allied producers sets production targets. Announced cuts or increases can move prices within minutes.
- US shale. US output responds to price with a lag of several months as companies add or drop drilling rigs. Baker Hughes publishes a weekly rig count every Friday.
- Disruptions. Outages, sanctions, conflicts and hurricanes in the Gulf of Mexico can remove barrels quickly.
Demand
- Economic growth. Factories, trucks and airlines burn more fuel when the economy is strong.
- Seasons. US gasoline demand peaks in the summer driving season. Heating oil demand rises in winter.
- China and India. These two economies account for a large share of demand growth.
Inventories
The US Energy Information Administration (EIA) releases its Weekly Petroleum Status Report, usually on Wednesday at 10:30 a.m. Eastern. A bigger-than-expected drop in crude stocks tends to lift prices, while a surprise build tends to weigh on them.
The dollar and money flows
Oil is priced in dollars, so a stronger dollar can dampen demand from other countries. Hedge funds and other speculators also amplify moves when they pile in or out of futures.
Contango and backwardation in one minute
Futures for later months can trade above or below the nearest month. When later months are more expensive, the market is in contango, which usually signals ample supply and paid storage. When nearby barrels are pricier, it is in backwardation, a sign of a tight market. This matters for oil ETFs that roll futures: in contango, rolling costs money over time, so the fund can lag the spot price.
From barrel to gas pump
The EIA breaks the US retail gasoline price into four parts: the cost of crude oil, refining costs and profits, distribution and marketing, and federal and state taxes. Crude is usually the largest piece, which is why pump prices follow oil with a lag of a few weeks.
This article is general education, not personalized financial advice. Read our editorial policy and disclaimer.
