The world oil market today continues to plummet. Due to increased production, the price plummeted. At the same time, producing countries began to receive less profit, while consumer countries were able to save the state budget. but oil oil discord. It is mined in different parts of the globe and has some chemical differences, which is reflected in its price. For example, WTI is cheaper than BRENT.
General information
Everyone has heard what oil is, but not everyone knows how important it is for modern production. What is a WTI? Raw oil. She is called so, based on her condition - this is the raw material, the same as other minerals. Naturally, flammable substances such as fuel oil, gasoline, diesel fuel are obtained from oil. But during secondary processing, it is able to give us other materials, including polyethylene, dyes, a huge amount of pesticides, wax, synthetic rubber and much more. All these products are used on many industries, from construction to manufacturing of household goods. Now it’s easier to name objects made not from oil than vice versa. This indicates its great influence on the economic development of states and the life of individual citizens.
Oil density
The weight of the product will depend on the density of the product. The Petroleum Institute in America has developed a special formula by which its density is calculated - API. This indicator is calculated in degrees. The higher the number, the easier, better and therefore more expensive raw materials. For example, WTI oil belongs to light grades. By this criterion, all varieties of this mineral are divided into three categories:
1.Easy (31.2⁰-41.1⁰ API).
2.Medium (24.4⁰-31.1⁰ API).
3. Heavy (10⁰-24.3⁰ API).
Sulfur content
The cost of its refining depends on the sulfur content in oil. The more it is, the more expensive the processing, and vice versa. Consequently, sulfur affects the price - the lower its content, the more expensive the product; the more it is, the cheaper it is.
There are currently 3 reference grades of oil. They have their own price on the trading floors. This does not mean that only these types of raw materials are bought and sold. But at the same time, prices for other varieties are directly dependent on the reference ones.
Reference grades
To marker (reference) grades include: WTI, BRENT, Dubai Crude oil.
- WTI. This oil is produced in Texas, USA. For a long time this variety was the only marker in the world, but in the 20th century two more were added to it. WTI oil is a high-quality product with a density of 40⁰ API and 0.4-0.5% sulfur. It is ideal for the production of gasoline, so the demand for it is constantly high. The main consumers are China and the United States.
- BRENT. It is obtained in the North and Norwegian Seas. This type acts as a marker for 70% of oil brands in the world. It also belongs to light grades - its density is 38.6-39⁰ API, sulfur content - 0.37%. There are historical patterns. There is a definite relationship between BRENT and WTI oil. Initially, WTI was more expensive than BRENT, but since 2007 everything has changed, and now the latter is the most expensive variety.
- Dubai Crude. It is obtained in the UAE, near Dubai. It is not as high quality as the first two grades, but also has a lot of weight in the global economy. Its density is 31⁰ API, and its sulfur content is 2%. This grade determines the price of oil in the Middle East, and is sold mainly in the Asia-Pacific region.
WTI & BRENT
These two grades influence the economic development of all oil exporting countries. Not only do suppliers receive less profit, but also the currency of these states is also depreciating. This can explain the fall of the ruble in 2015.In order to answer the question why Brent is more expensive than WTI, you need to figure out what this price on the exchange is made up of.
Oil is a commodity, and the price of any commodity is determined by two components - supply and demand. The higher the demand, the more expensive the product, and vice versa. Regarding Brent oil, I also need to say that it has an impact on the price formation of most varieties of this mineral in the world. WTI is cheaper than BRENT also because it is more expensive to transport.
Currently, there is a situation when world oil prices began to rise. This was made possible thanks to a reduction in raw material production due to an oversupply of this product on world markets.
Some analysts argue that the price will not go down, because it has “bounced off the bottom”, others say that this is an adjustment, and the price may drop to $ 20 per barrel. We can only observe the change in quotations and make our forecasts based on the analysis.
