WTI Cash: Everything you need to know

West Texas Intermediate (WTI) crude oil is a specific grade of crude and one of the three main pricing benchmarks, along with Brent and Dubai Crude. It is classified as a light sweet oil because it has a low density and contains only 0.24% to 0.34% sulphur.

WTI crude can be traded through spot or forward contracts. Traders can also customise WTI price charts on most broker platforms.

WTI often refers to the WTI crude oil futures contract traded on the New York Mercantile Exchange (NYMEX). This contract represents a high-quality oil that is easy to refine.

History of WTI cash

WTI is the main oil benchmark for North America because it comes from the United States, especially the Permian Basin.

The West Texas Intermediate pricing model is the main crude oil standard in the United States. It is one of the most traded commodities on many platforms.

Although it does not come from one specific field, crude oil with a similar composition can be classified as WTI. This classification is based on the oil’s shared characteristics.

WTI has long been linked to oil production and trading in Texas and Oklahoma. Today, it is also used in global markets.

The evolution of the physical WTI market

On January 28, 1981, the US government decontrolled WTI oil prices. This change opened the physical WTI oil market. Before this, price limits in the US Emergency Petroleum Allocation Act of 1973 forced sellers to use various spot prices for WTI crude.

After price decontrol, sellers began offering WTI crude oil at spot prices in Cushing, Oklahoma, and in Midland and Houston, Texas. The oil price drops of 1985–1986 sharply reduced Cushing’s local production and pushed Gulf Coast imported crude into both the Cushing area and the WTI market.

The rise of the WTI spot market occurred alongside the growth of the WTI futures market. Because WTI spot prices were volatile, producers and refiners around the world began using WTI futures contracts to hedge their risks. This helped establish assessed physical WTI spot prices as a globally accepted crude oil benchmark.

WTI cash as an oil market benchmark

In the oil sector, a benchmark matters because it gives buyers and sellers a clear reference price for crude oil. Media outlets regularly cite the WTI price as one of these benchmarks. Traders commonly use both Brent and WTI, and they often compare their prices. They refer to the price difference between them as the Brent–WTI spread.

WTI is not the most widely used benchmark worldwide; Brent holds that position and appears in about two-thirds of all oil contracts. Traders regard both as high-quality oils, making them the two most important global benchmarks. WTI contains 0.24%–0.34% sulfur, while Brent contains 0.35%–0.40%.

The lower the sulphur level of oil, the easier it is to refine, and hence the more appealing it is. Sweetness is defined as a sulphur level of less than 0.5%. WTI is best for gasoline, while Brent is best for diesel.

Given its quality, WTI should trade at a premium to Brent, but this does not always happen. Although the two oils can trade at similar prices, each has its own supply and demand conditions, and its price reflects those specific market factors.

Since the US shale boom increased WTI production, its price has dropped, and it now often trades at a discount to Brent. It is also expensive to move WTI offshore to markets that use Brent, which makes WTI less competitive on price.

Trading commodities via CFDs

Contracts for difference are perfect for trading commodities. More leverage is available when trading CFDs on popular spot commodities such as crude oil, sugar, or coffee. Traders can spend less money and acquire more exposure to the underlying instrument in this case.

The needed margin might range between 5 and 10% of the overall contract value. This is significantly less than the average margin of other asset groups.

• No Inflation Impact and Liquidity

This asset class appeals to both new and experienced traders because it is highly liquid and is less affected by rising inflation.

• Diversificatie

Commodity CFD trading is also an excellent strategy to diversify your portfolio and protect against risks.

• Oil CFDs are becoming increasingly popular.

Many traders use oil CFDs as a common commodities contract. Because traders view oil as an indicator of global economic health, they actively speculate on its price. Oil prices usually rise when the economy expands.

• 24-Hour Buying and Selling

Most commodity markets stay open almost 24 hours a day, and traders typically trade CFDs during those same hours.

• Lage prijs

Commodity CFDs provide a low-cost entry point, allowing more traders to trade commodities than previously feasible.

• The spreads are narrow and the commissions are minimal.
• Trading Commodities CFDs allows you to profit from narrow spreads and minimal costs.

Trading crude oil with IronFX

Because of their low or negative correlations and large potential profits, CFDs on spot commodities are an excellent method to engage in the commodity markets and a fantastic trading option. This asset class, when combined with IronFX’s trading environment, may provide outstanding chances and increase the diversity of our clients’ trading strategies.

You can buy and sell CFDs on spot commodities with top-tier spreads and execution, without taking on extra foreign exchange risk. Our MetaTrader 4 platform, available on multiple devices, lets traders invest in spot commodities quickly and efficiently, with no requotes. You can enter the trading world with confidence and access over 500 instruments from six asset classes on one platform. You also benefit from tight spreads, strong pricing, fast execution, and daily market analysis from a team of experts.

Disclaimer:
This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked, in this communication.