Crude Oil Benchmarks: WTI and BrentWTI
WTI (West Texas Intermediate) and Brent are the two main crude oil benchmarks. WTI is a US crude priced for delivery at Cushing, Oklahoma; Brent is based on North Sea crude and is used to price much of the world’s oil. Their price difference is called the Brent–WTI spread.
When the news says “oil rose 2% today”, it does not mean every barrel in the world. It means a benchmark — a specific, heavily traded type of crude used as a reference price. Most other crudes are priced at a premium or discount to these benchmarks, so knowing what WTI and Brent are, and why they differ, is the first step to reading the oil market.
- Category
- Commodities, Energy and Carbon
- Reading time
- 4 min
- Also called
- Oil benchmarks, Brent and WTI, Benchmark crude
- Updated
Oil benchmarks in plain words
There are hundreds of crude oils with different qualities and locations. Traders use a few benchmarks as reference prices; three of the most important are Brent, WTI and Dubai/Oman.1
WTI is a light, sweet US crude priced at the trading hub of Cushing, Oklahoma.1 Brent, the most widely used global benchmark, is based on light, sweet crude streams from the North Sea.1
Both are traded mainly through Futures Contract contracts. The difference between them, the Brent–WTI spread, reflects transport costs, location and supply and demand.
How to read a crude oil benchmark, step by step
Identify the benchmark
Check whether a quote refers to WTI, Brent or another crude.1
Check the contract month
Futures prices refer to a delivery month; the front month is the nearest one.
Know the contract size
A standard Brent or WTI futures contract covers 1,000 barrels, so a $1 move equals $1,000 per contract.
Understand settlement
ICE Brent futures are deliverable via EFP with an option to cash settle; check how your contract settles before expiry.2
Compare the two
Brent − WTI = the spread. Watch whether it widens or narrows.
Follow the drivers
Track inventories, production decisions, refinery demand and the economic data that moves oil.
Worked examples
Example 1 — The Brent–WTI spread
Spread $3.50Hypothetical prices: Brent $82.00, WTI $78.50 per barrel.
| Spread | $82.00 − $78.50 = $3.50 per barrel |
| Per 1,000 barrels | $3.50 × 1,000 = $3,500 |
Brent trades above WTI here; the gap reflects location and quality as well as supply and demand. Both are light, sweet crudes priced in different places.1
Example 2 — A futures move
+$2,400You buy 1 crude oil futures contract (1,000 barrels) at a hypothetical $75.00 and sell at $77.40.
| Price change | $77.40 − $75.00 = $2.40 |
| Profit | $2.40 × 1,000 = $2,400 |
Small price changes become large money amounts because of the contract size and Leverage.2
Example 3 — A crude priced off Brent
$78.80 per barrelA cargo is priced at Brent minus $1.20. Brent is a hypothetical $80.00.
| Cargo price | $80.00 − $1.20 = $78.80 per barrel |
| For 500,000 barrels | $78.80 × 500,000 = $39,400,000 |
Many physical crudes are priced as a difference to a benchmark; Brent is used to price light, sweet crude far beyond Europe.1
WTI vs. Brent
| Aspect | WTI | Brent |
|---|---|---|
| Origin | United States | North Sea |
| Pricing point | Cushing, Oklahoma | North Sea (waterborne) |
| Main use | US crude benchmark | Most widely used global benchmark |
| Quality | Light, sweet | Light, sweet |
Why traders follow oil benchmarks
Trading oil
Futures, options and CFDs are based on WTI or Brent.
Pricing physical crude
Cargoes are priced at a premium or discount to a benchmark.
Macro analysis
Oil prices feed into Inflation and growth expectations.
Spread trading
Traders take positions on the Brent–WTI difference.
Advantages and disadvantages
Advantages
- Give one clear, liquid reference price.
- Deep futures markets make hedging easier.
- Make different crudes easy to compare.
Disadvantages
- A benchmark may not match the crude you actually buy or sell.
- Futures prices can be very volatile.
- Contract rolls and expiry add complexity.
- Local storage or pipeline issues can distort one benchmark.
Going deeper
Read as far as you need. Each level builds on the one before it.
What a benchmark is
Beginner
A benchmark is a widely traded crude used as a reference. Brent, WTI and Dubai/Oman are among the most important.1
Location matters
Intermediate
Futures, expiry and settlement
Advanced
Most trading happens in futures. Contract terms decide what happens at expiry: ICE Brent is deliverable via EFP with an option to cash settle.2 Close or roll positions before expiry and watch Open Interest and Volatility.
Common mistakes
Mixing up the benchmarks
Comparing a WTI chart with a Brent price.
Ignoring contract size
Forgetting that $1 equals $1,000 per standard contract.
Holding into expiry
Not knowing how and when the contract settles.
Treating oil as one price
Assuming all crudes move exactly with the benchmark.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Benchmarks are reference prices for crude oil.
- WTI is a US crude priced at Cushing, Oklahoma.
- Brent is North Sea crude and the most widely used global benchmark.
- The Brent–WTI spread reflects location, transport and supply.
- Standard futures contracts cover 1,000 barrels.
Frequently asked questions
Why is Brent usually more expensive than WTI?
What does “light, sweet” mean?
Can I buy physical oil?
Further learning
- Futures Contract
How oil benchmarks are traded.
- Settlement
What happens at expiry.
- Hedging
How producers and users lock in prices.
- Contract for Difference
Another way traders get oil exposure.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- U.S. Energy Information Administration. Benchmarks play an important role in pricing crude oil (opens in a new tab) Checked .
- ICE (Intercontinental Exchange). Brent Crude Futures (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.