West Texas Intermediate

West Texas Intermediate (WTI) is a well-known benchmark for oil prices. The oil futures contract on the New York Mercantile Exchange has WTI as its underlying asset. It is of high quality and contains low sulfur (sweet). The U.S. Department of Energy keeps records of past oil price information.

The standard and eventual uses of oil drilling depend heavily on the field they come from; therefore, oil is traded using benchmarks. These allow oil traders to identify the oil being exchanged immediately (and ultimately delivered). In addition, it enjoys high confidence because of its high grade and the potential for simple processing or refinement of the crude.

• West Texas Intermediate (WTI), also known as Texas Light Sweet on occasion, is a key oil benchmark in the commodities market.
• With only 0.24 percent sulfur, WTI crude oil qualifies as "sweet" and has an "API Gravity" of 39.6 degrees, making it "light" crude oil.
• Compared to the majority of other types of oil that are available on the market, WTI is a very high-grade crude oil that is highly prized. It is a superior gasoline and diesel fuel that can be refined from a single barrel.

West Texas Intermediate (WTI), also known as Texas Light Sweet on occasion, is a key oil benchmark in the commodities market. There are three such benchmarks, and the other two are Brent crude and Dubai. There is a distinct "price" for each benchmark. As a result, there are many oil prices; thus, one must indicate which benchmark they're referring to if they want to know the "price of oil."

(WTI) is a very high-grade crude oil that is highly prized because more superior gasoline and diesel fuel can be refined from a single barrel of it than from the majority of other types of oil that are available on the market. With only 0.24 percent sulfur, WTI crude oil qualifies as "sweet" and has an "API Gravity" of 39.6 degrees, making it a "light" crude oil. The "American Petroleum Institute Gravity" is called the "API Gravity," a metric that evaluates how light or heavy crude oil is compared to water.

WTI is valued as light oil, similar to Brent, but it doesn't have the same worldwide reach. One factor contributing to this is that the United States generally forbids crude oil export (except for a few). WTI is produced in landlocked regions and must be transported to the coast, where most refineries are situated, another significant factor contributing to its low value. Similarly, the Midwest region of the United States has an excess of oil. As a result, WTI currently trades at a "discount" to Brent oil's price.

Example #1

Below is a table depicting Cushing, OK WTI spot price over 30 years. This table shows a range of highs and lows and the related fluctuations. Crude oil prices are affected by several short- and long-term factors, which can be summed up as follows: the supply of producer nations, especially those who are members of OPEC (Organization of the Petroleum Exporting Countries), the global demand for fuel, the number of stocks in nations that rely heavily on fuel, and geopolitical factors associated with the Middle Eastern conflicts.

For example, the price of crude oil and related refined products rose significantly at the beginning of this century due to increased demand in emerging economies. In addition, only a small amount of money was invested in exploratory activities, contributing to the poor supply.

West Texas Intermediate price table:

Example #2

The recent pandemic of 2019 took a toll on almost all sectors of the economy. The energy sector was no exception. West Texas Intermediate (WTI) crude oil price dropped significantly in 2020 due to the COVID-19 pandemic. With travel and industrial activity reduced, oil demand decreased, resulting in an oversupply in the market. An oil price war between Russia and Saudi Arabia also contributed to the decline in WTI prices, which hit historic lows in April 2020.

The above chart indicates the West Texas Intermediate (WTI) crude oil futures. The chart tracks the price of a barrel of WTI crude oil over a selected period. The x-axis represents time, and the y-axis represents US dollar prices per barrel. 

West Texas Intermediate crude oil and Brent crude oil are both benchmark crude oils, but they differ in many ways:

This has been a guide to what is West Texas Intermediate. We compare it with brent crude, explain it with chart and examples. You can learn more about accounting from the following articles –

• Oil Investing
• Spot Market
• Balance of Trade