Table of Contents
- What Is West Texas Intermediate (WTI)?
- Understanding West Texas Intermediate (WTI)
- West Texas Intermediate As an Oil Market Benchmark
- WTI vs. Brent
- Is the U.S. a Net Exporter or Importer of Oil?
- What Countries Does the U.S. Import Petroleum From?
- What's the Difference Between Crude Oil, Petroleum, and Petroleum Products?
- The Bottom Line
What Is West Texas Intermediate (WTI)?
Let me explain West Texas Intermediate (WTI) directly to you—it's a specific grade of crude oil and one of the three primary benchmarks used in oil pricing, right alongside Brent and Dubai Crude. WTI stands out as a high-quality oil that's relatively straightforward to refine.
You should know that WTI is classified as a light sweet oil. It has less than 0.50% sulfur content, typically ranging from 0.24% to 0.34%, which is why it's called 'sweet.' Its low density also makes it 'light.'
WTI serves as the underlying commodity for the oil futures contracts on the New York Mercantile Exchange (NYMEX).
Key Takeaways
- West Texas Intermediate (WTI), a light, sweet crude oil, is one of three global oil benchmarks.
- Sourced primarily in inland Texas, WTI is one of the world's highest-quality oils.
- WTI is the underlying commodity for the NYMEX's oil futures contract.
- WTI is often compared to Brent crude, which is the benchmark for two-thirds of the world's oil contracts.
Understanding West Texas Intermediate (WTI)
As the main oil benchmark for North America, WTI is sourced from the United States, mainly originating in the Permian Basin, which is the nation's top-producing oil field. From there, it moves via pipelines to refineries in the Midwest and the Gulf of Mexico.
The primary delivery point for physical exchange and price settlement of WTI is Cushing, Oklahoma, often referred to as 'The Pipeline Crossroads of the World.' This hub includes 35 pipelines—20 inbound and 15 outbound—along with 16 storage terminals.
Cushing offers 90 million barrels of storage capacity, accounting for 13% of U.S. oil storage. Its inbound and outbound capacity reaches 6.5 million barrels per day.
West Texas Intermediate As an Oil Market Benchmark
In the oil market, a benchmark acts as a reference price for buyers and sellers of crude oil. You'll often hear these benchmarks mentioned in the media as simply 'the price of oil.'
Brent crude and WTI are the most prominent benchmarks, and their prices are frequently compared. The price difference between them is known as the Brent-WTI spread.
WTI isn't the most widely used benchmark worldwide—that's Brent, which covers two-thirds of global oil contracts. However, both WTI and Brent are high-quality oils, making them the two most critical benchmarks in the world.
WTI vs. Brent
WTI has a sulfur content between 0.24% and 0.34%, while Brent ranges from 0.35% to 0.40%. Lower sulfur means easier refining, so oils with under 0.5% are considered sweet—and WTI is sweeter, making it slightly easier to process.
In theory, WTI should command a premium over Brent due to its quality, but that's not always the reality. Each has its own supply and demand dynamics, leading to prices that reflect unique market conditions.
Since the U.S. shale boom boosted WTI production, its price has generally fallen and trades at a discount to Brent. Brent connects to broader global markets, so more factors affect its price. Plus, shipping WTI overseas to compete in Brent's markets can be expensive.
Is the U.S. a Net Exporter or Importer of Oil?
The U.S. exports more petroleum products than it imports. In 2023, it imported about 8.51 million barrels per day from 86 countries, while exporting 10.15 million barrels to 173 countries and three U.S. territories. These figures include crude oil, hydrocarbon gas liquids, refined products, and biofuels.
What Countries Does the U.S. Import Petroleum From?
The top five sources for U.S. petroleum imports are Canada, Mexico, Saudi Arabia, Iraq, and Brazil.
What's the Difference Between Crude Oil, Petroleum, and Petroleum Products?
Crude oil is a liquid mixture of hydrocarbons extracted from underground and refined into fuels and other products. Petroleum products come from refining crude oil and other liquids in refineries. Petroleum is a broader term encompassing both crude oil and its refined products.
The Bottom Line
West Texas Intermediate is a high-quality crude oil from West Texas. As a leading global source, it benchmarks the U.S. oil industry and investor decisions. When business reports mention crude oil prices, they're quoting WTI.
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