WTI (West Texas Intermediate) and Brent crude are the two primary global oil benchmarks used to price crude oil worldwide. While both are light, sweet crude oils, they differ in their geographic origins, physical characteristics, and the regional markets they primarily serve. Understanding these differences is essential for energy professionals, traders, and policymakers who track global oil markets.
Key Points
- Geographic origin: WTI is extracted from wells in the United States, primarily Texas, while Brent comes from the North Sea between the UK and Norway
- API gravity and sulfur content: Both are light, sweet crudes, but WTI is slightly lighter and has marginally lower sulfur content than Brent
- Market focus: WTI primarily serves North American refineries, while Brent serves European, African, and Asian markets
- Price relationship: The two benchmarks typically trade within a few dollars of each other, though regional supply and demand dynamics can create spreads
- Global significance: Together, they represent the most widely used price references for crude oil transactions worldwide
Understanding the Two Benchmarks
Crude oil is not a uniform commodity. Different oil fields produce crude with varying characteristics—some are heavier, some lighter; some contain more sulfur, others less. This variation affects how refineries can process the oil and what products they can make from it. To create standardized pricing, the global energy market developed benchmark crudes that represent specific quality grades.
WTI emerged as the primary U.S. benchmark in the 1980s, based on crude produced in the Permian Basin and other Texas fields. It became the standard reference for North American oil trading and remains the primary benchmark for contracts traded on the New York Mercantile Exchange (NYMEX).
Brent crude takes its name from the Brent oil field in the North Sea, discovered in the 1970s. As North Sea production ramped up, Brent became the natural benchmark for European and global markets. Today, Brent contracts trade on the Intercontinental Exchange (ICE) in London and serve as the reference price for most international crude oil sales.
How It Works
The differences between WTI and Brent operate across several dimensions:
Physical Characteristics: WTI has an API gravity of approximately 40 degrees and sulfur content around 0.24%, making it a light, sweet crude. Brent has an API gravity near 38 degrees with sulfur content around 0.37%. While these differences are modest, they affect refinery yields and processing costs. Lighter crude (higher API) generally commands a premium because it yields more valuable products like gasoline and diesel.
Market Geography: WTI reflects supply and demand conditions in North America, particularly the U.S. Gulf Coast and Midwest refining centers. Brent reflects conditions in Europe, Africa, and Asia—a much larger geographic market. This means Brent prices are influenced by a broader range of global supply disruptions, geopolitical events, and demand shifts.
Price Discovery: WTI prices are determined through futures contracts on NYMEX, where traders bid and offer based on expected supply and demand. Brent prices emerge from ICE trading plus assessments from price reporting agencies that track physical crude transactions. The two price-setting mechanisms can occasionally diverge, though arbitrage typically keeps them aligned.
Why It Matters
For traders and refiners, the WTI-Brent spread—the price difference between the two benchmarks—represents real economic value. When WTI trades at a discount to Brent, it may reflect North American supply abundance or limited export capacity. Refiners positioned to buy WTI can capture this discount. Conversely, when WTI trades at a premium, it signals relative scarcity in North America.
For policymakers and analysts, these benchmarks serve as the primary indicators of global oil market health. Energy economists track WTI and Brent prices to assess inflation pressures, economic growth expectations, and geopolitical risk. A sudden spike in both benchmarks typically signals supply concerns or demand shocks that warrant policy attention.
The choice of benchmark also matters for contract negotiations. Long-term oil supply agreements typically reference either WTI or Brent depending on the buyer's location and refinery configuration. A buyer in Singapore might prefer Brent pricing, while a U.S. refiner might prefer WTI. The benchmark choice can represent millions of dollars in value over the life of a contract.
Related Terms
- API Gravity: A measure of crude oil density; higher API gravity indicates lighter oil, which typically commands a premium price
- Sweet Crude: Crude oil with low sulfur content (below 0.5%), which is easier and cheaper to refine than sour crude
- Spread: The price difference between two related commodities, such as the WTI-Brent spread
- Benchmark Crude: A standardized crude oil grade used as a reference price for other crude oils in a region
Frequently Asked Questions
Why are there two benchmarks instead of one?
Crude oil markets developed regionally before becoming truly global. North American markets coalesced around WTI, while European and international markets adopted Brent. Today, maintaining both benchmarks reflects the reality that crude oil is transported by ship and pipeline, and regional supply-demand dynamics create persistent price differences. Additionally, the two benchmarks serve different refinery configurations and customer bases.
Which benchmark is more important?
Brent is generally considered the more globally representative benchmark because it influences pricing for the majority of internationally traded crude oil. However, WTI remains critically important for North American markets and serves as a key indicator of U.S. energy conditions. Most energy professionals monitor both.
Can WTI and Brent prices diverge significantly?
Yes, though arbitrage typically limits extreme divergences. The WTI-Brent spread can widen to $5-10 per barrel during periods of regional supply disruption or transportation bottlenecks. For example, when U.S. crude export restrictions were in place, WTI often traded at a significant discount to Brent. These spreads create trading opportunities and reflect real economic constraints on moving crude between regions.
How do these benchmarks affect gas prices?
While crude oil benchmarks don't directly determine retail gasoline prices, they are the primary input cost for refiners. Changes in WTI or Brent prices typically flow through to pump prices within weeks, though other factors like refining costs, taxes, and distribution margins also play important roles.
Last updated: January 21, 2026. For the latest energy news and analysis, visit energystandard.io.