DEFINITION of WTI
WTI stands for West Texas Intermediate (occasionally called Texas Light Sweet), an oil benchmark that is central to commodities trading. It is one of the three major oil benchmarks used in trading. The others are Brent crude and Dubai/Oman.
WHAT IT IS IN ESSENCE
West Texas Intermediate (WTI) is a trading classification of crude oil and one of the most commonly used benchmarks in oil prices.
It is one of the most referenced benchmarks used in oil news reports on oil prices, along with the Brent price. That one comes from the North Sea.
The oil is considered to be very light, with low sulfur content, considerably lighter and sweeter than Brent Crude, Dubai, or Oman.
WTI only contains 0.24% sulfur and has an API gravity of approximately 39.6. The oil is primarily refined in the Gulf Coast and Midwest areas of the United States.
This grade is described as light because of its relatively low density, and sweet because of its low sulfur content.
HOW TO USE
WTI is also the underlying asset in the New York Mercantile Exchange oil futures contract.
The main trading hub for crude oil is located in Cushing, Oklahoma. It is the delivery point for crude contracts. Also, it is the price settlement point for West Texas Intermediate on the New York Mercantile Exchange.
Light Sweet Crude Oil futures and options, in particular, West Texas Intermediate futures, are the most actively traded energy product in the world.
West Texas Intermediate plays an important role in managing risk in the energy sector worldwide as it has high liquidity and a large number of customers.
The investors can price these different types of oil on the world market. Currently, there are two major benchmarks for world oil prices, West Texas Intermediate (WTI for short) and Brent crude oil.
WTI often trades at a premium, usually by just a few dollars a barrel.