Explainer: Why do Brent and WTI have different prices?

When people talk about the "price of oil", they often forget one essential point: there is no single oil, but many crudes with different qualities and uses. Brent and WTI are the two best-known benchmarks, and the gap between their prices often puzzles investors.

Crude oil is never consumed as it is: it has to be refined first. Its value therefore depends on its quality, mainly measured using two simple criteria. First, density (or API gravity): the "lighter" the crude, the easier it is to turn into useful fuels such as gasoline or diesel. Second comes its sulphur content: low-sulphur crude is less polluting and cheaper to process. The logical result: light, low-sulphur crudes are generally more expensive than heavy, high-sulphur crudes.

Brent, WTI: similar quality, but different uses

WTI (West Texas Intermediate) and Brent are both light, low-sulphur crudes, meaning that they are high quality. The key difference is not their composition, but rather their location and logistics. WTI is produced in the US and stored in Cushing, Oklahoma, an inland hub that is not ideal for exports. It mainly supplies the US market. Brent, meanwhile, comes from the North Sea and is loaded at easily accessible seaports, making it the ideal benchmark for global trade. That is why Brent serves as the pricing basis for around two-thirds of the oil traded worldwide.

But the market is not limited to this Western duo. There are hundreds of other grades, including Dubai Light, which serves as a benchmark for the Asian market. This basket of Persian Gulf crudes highlights the other side of the market: heavier, more sulphurous oils. Unlike WTI and Brent, these viscous and corrosive crudes are costly to refine and often end up as bitumen or heavy fuel oil, whereas light crudes more readily yield gasoline. This quality hierarchy explains why, in normal times, light crudes trade at a premium to heavy grades.

Why is Brent often more expensive than WTI?

In theory, WTI should sometimes be more expensive than Brent, because it is slightly lighter. However, in practice, it is often the other way around. The main reason is local supply and demand. From 2011, the shale oil revolution (shale oil) sent US output soaring, creating a surplus that was hard to clear domestically. Inventories swelled, putting downward pressure on the WTI price. Since the US resumed large-scale oil exports and infrastructure has improved, the gap between Brent and WTI has narrowed. Although it remains sensitive to geopolitical shocks: any international tension affects Brent-the global benchmark-more than WTI, which is more centred on the US market.