Crude oil is a primary energy source in the global economy. In addition to being one of the most actively traded commodities, the price of crude oil is extremely sensitive to geopolitical and weather events.
Key Characteristics of Crude Oil
When it comes to actual oil, there are different grades. The most widely traded grades are Brent Crude (also known as “Brent”) and West Texas Intermediate (WTI). Brent is the oil produced in the Brent oil fields and other locations in the North Sea.
Indicators and Trading Markets
WTI is the primary benchmark for oil in North America. WTI crude oil contracts are listed on the NYMEX (New York Mercantile Exchange) section of the CME (Chicago Mercantile Exchange). WTI crude oil contracts are delivered in Cushing, Oklahoma.
Factors Influencing Indicator Pricing
Brent oil and WTI crude oil have different characteristics, leading to a price differential called “quality spread.” They are also located in different parts of the world (Brent in Europe and WTI in North America). This is referred to as “location spread.”
The Impact of Global Events on Crude Oil Prices
Political shifts, weather events, and global health crises significantly affect the oil market. Due to the outbreak of the Coronavirus, the International Energy Agency (IEA) lowered its forecasts for global oil demand in March 2020, predicting the first annual decline in demand since 2009.
Frequently Asked Questions (FAQs)
What is ICE Brent Oil?
ICE Brent Oil is a standardized futures contract offered by the Intercontinental Exchange (ICE). Each contract is equivalent to 1,000 barrels of Brent crude oil. It is traded in U.S. dollars and takes place on exchanges in New York, London, and Singapore.
Where is Brent crude oil refined?
Brent crude oil is refined worldwide by refineries that purchase barrels of crude oil. However, since it is drilled in Northwestern Europe, most of the oil is refined in that region.
How much gasoline is produced from one barrel of crude oil?
Refining oil in the United States can produce up to 20 gallons of standard motor gasoline and up to 12 gallons of diesel fuel (or “heating oil”) per barrel. Each barrel contains 42 gallons of crude oil.
What is the WTI Cushing spot?
Light sweet crude oil contracts for West Texas are delivered in Cushing, Oklahoma. The “market price” is another way to refer to the market price of a commodity, so the Cushing price is the price at which you can buy or sell a barrel of oil delivered in Cushing.
Source: https://www.thebalancemoney.com/crude-oil-brent-versus-wti-808872
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