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Oil prices can be quite confusing, as there are more than one and they can have different names across the trading world. In this crude oil prices explained video we try to clear it all up by talking about what crude oil actually is, how crude oil prices are determined and the difference between the two main types of oil – WTI and Brent.
There are several other types of oil being traded across the globe, be it from countries like Russia or Iran, or the oil coming from the OPEC countries. But the prices of WTI Crude oil (aka West Texas Intermediate) and Brent remain the most referred to oil prices on the global markets. Both are denominated in U.S. dollars and both are part of more interconnected economies and infrastructures that make it easier for that type of oil to be transported to wherever they buyer is.
That isn’t to say that their oil price isn’t impacted by the other sources of oil. Far from it. OPEC meetings are still the most important single events when it comes to oil trading be it for Crude or for Brent. But those two are definitely the most popular among traders who invest and trade vast amounts of money in oil futures daily, causing oil prices to frequently have large swing in both directions.
The oil price of Brent and WTI does tend to have a correlation, being part of a supply chain for roughly the same resource, but it is important to understand that they are two separate things.
WTI is extracted from wells in the United States – Texas, Louisiana and North Dakota. From there they are shipped to refineries across the U.S. to be turned to more user-friendly things like gasoline, heating oil and airplane fuel.
Brent refers to oil taken from the North Sea and is a common name for the four oil grades extracted there by different countries and companies – Brent blend, Forties blend, Osberg and Ekofisk.
One important thing to remember is that Brent oil is graded as light or “sweet” because of its level of sulfur. This makes it easier to refine compared to WTI and brings its overall cost down.
Crude oil trading deals with oil futures. As the price is quite volatile, markets have settled on dealing with contracts that are executed in one, three or even more months ahead. This way buyers get a guaranteed quantity of this valuable resource and they can plan ahead without worrying about the day-to-day movements of WTI oil or Brent.
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