WTI Oil - Definition and Characteristics

WTI and Brent oil benchmarks

Benchmarks are essential in the oil industry because they serve as a price reference for buyers and sellers of crude oil. As a result, oil benchmarks are commonly referred to as the price of oil in the media. Although Brent and WTI crude are the most widely used benchmarks, their prices are frequently compared. The Brent-WTI spread is the price differential between Brent and WTI.

WTI isn't the most widely used benchmark globally; Brent is, with two-thirds of all oil contracts used as a benchmark. On the other hand, both are regarded as high-quality oils and serve as the world's two most important oil standards. According to Investopedia, WTI has a sulfur level of 0.34%, whereas Brent has a sulfur content of 0.37%. The easier an oil is to refine, the lower its sulfur level, making it more appealing. Sweetness is defined as a sulfur concentration of less than 0.5%.

WTI is the underlying commodity of the NYMEX oil futures contract and is regarded as a high-quality, readily processed oil.

The NYMEX WTI Light Sweet Crude Oil futures contract was created in 1983 in response to the volatility of crude oil prices. The NYMEX Crude Oil contract is traded on the New York Mercantile Exchange, which is now part of the Chicago Mercantile Exchange, under the symbol CL. The futures contract is for 1,000 US barrels of WTI crude oil or 42,000 US gallons.

Performance

Oil prices are cyclical, rising in response to either high inflation, rapid economic growth, or both. On the other side, when the global economy is about to enter a recession, oil tends to underperform.

Oil saw a massive run-up from 40 to 140 dollars in 2007–2008, contributing to the worldwide recession. It rapidly dropped to 40 USD as demand dwindled owing to global economic concerns. Demand resurfaced as the worldwide situation improved, and WTI recovered to about 120 USD. It then fluctuated between 100 and 40 dollars.

WTI oil plummeted below 0 USD during the panic of 2020 following the world's first COVID shutdown, only to rise enormously when central banks began printing money, and people resumed their everyday lives, increasing demand.

As Russia invaded Ukraine in 2022, oil prices soared to above 140 dollars per barrel, causing supply concerns mostly in Europe.

With a strategy of good exit timing, WTI oil has demonstrated some excellent returns for long-term investors. On the other hand, its volatility is ideal for short-term and swing traders.

WTI oil - quotes and trading

Our Purple Trading Metatrader 4 platform allows you to trade CFDs on the WTI oil. To begin, go to the Metatrader 4 platform and look for the ticker CL, then hit the new order button. The next window will appear.

 _{Source: Purple Trading Metatrader 4}

Lot value calculation

When you open our Metatrader 4 platform and click on the CL ticker, you'll observe that during moments of strong liquidity, the difference between the Ask and Bid price is roughly 6.00 cents (usually when London and New York are open for trading).

The minimal volume for trading WTI oil is one micro lot (0.01). If you trade a mini lot (0.1), you will gain or lose 10 USD for each 10 cents oil makes. Every 10 cents of oil movement will yield 50 USD of profit/loss when trading half a lot. For example, you buy half a lot at 115 USD, and oil goes to 116 USD. Your total profit will be 500 USD (calculated as 1 USD (100 cents) movement * 50 USD profit per 10 cents of the move). When entering a short position, the same principle determines your profit or loss.

Keep in mind that WTI oil is priced in US dollars. Therefore, your profit or loss must be exchanged for EUR at the current exchange rate if your account is in EUR or another currency.

You have the option of trading at market price (market execution) or using pending orders (limit and stop orders). In addition, you can start trading without the stop-loss and take-profit orders and add them later.

Start trading oil with zero comission fees today!

Frequented asked questions