Oil trading 101: Brent vs WTI
Learning objectives
Distinguish Brent from WTI by origin, delivery and the market each one prices
Explain what the spread between them reflects and why it moves
Size an oil position correctly given a contract covering 1,000 barrels
Two benchmarks
Crude oil is the most actively traded commodity in the world, and it comes in two benchmark grades on almost every retail platform. Knowing which you're trading, and why they differ, is the starting point.
Brent takes its name from a North Sea oil field. It's extracted offshore and moves by tanker, which makes it waterborne and therefore easy to deliver anywhere with a port. That accessibility is why Brent has become the reference price for the majority of internationally traded crude, particularly for Europe, Africa and much of Asia.
WTI, West Texas Intermediate, is produced in the United States and delivered at Cushing, Oklahoma, which is landlocked. It's the benchmark for US crude, and its price is more sensitive to conditions inside the American market specifically: domestic production, pipeline capacity and storage availability at that single delivery point.
Both are light and sweet, meaning low density and low sulphur, which makes them relatively cheap to refine into petrol and diesel. WTI is fractionally lighter and sweeter than Brent. On quality alone, WTI would be expected to trade slightly higher.
The spread between them
It usually doesn't. For most of the past decade Brent has traded at a premium to WTI, and the size of that gap moves for reasons worth understanding.
Transport and access. Brent's waterborne delivery makes it easy to move to wherever demand is strongest. WTI has to get out of Cushing first, which historically constrained it.
US production. When American output rises sharply, domestic supply builds and WTI weakens relative to Brent.
Storage at Cushing. A single delivery point creates a specific vulnerability. When storage there fills, WTI can fall well below Brent regardless of global conditions.
Geopolitics. Disruption to seaborne supply routes or to Middle Eastern and African production affects Brent more directly, widening the premium.
The gap between them is itself a traded instrument institutionally. For a retail trader the practical value is understanding that the two benchmarks can move differently, so a view on global oil demand is expressed more cleanly in Brent, while a view on US supply conditions is expressed more cleanly in WTI.
Which oil market should you trade?
For most retail traders the honest answer is that it matters less than the sizing, but there are reasonable defaults.
Brent if your view is about global demand, OPEC decisions or geopolitical supply risk.
WTI if your view concerns US production, inventories or the American economy. WTI also tends to carry marginally tighter spreads on many retail platforms, and it's the contract most closely tied to the weekly US inventory data covered in What moves oil prices.
Whichever you choose, trade one. They are highly correlated, and holding both is the correlation trap from Managing leverage as a beginner wearing a different label.
Oil sizing
A standard oil contract covers 1,000 barrels. So on one lot:
- A $1 move is $1,000
- A $0.10 move is $100
- A $0.01 move is $10
That last line is worth sitting with. One cent of oil movement on a single lot equals a full pip on a standard forex lot. Oil routinely moves two or three dollars in a session, which is two or three hundred forex pips of equivalent consequence.
Run the numbers properly. Anna has $2,000 and risks 1%, so $20. Her stop is $1.50 away from entry.
$20 ÷ ($1.50 × $1,000 per lot) = $20 ÷ $1,500 = 0.013 lots
Which rounds down to 0.01 lots, the minimum many brokers offer, and even that carries slightly more than her intended risk on a $1.50 stop.
That's the honest position for a small account: oil requires either a larger account or a tighter stop than the instrument comfortably allows. Risk per trade: the 1% rule and position sizing named this constraint, and oil is where it bites hardest.
Hours and conditions
Oil doesn't trade continuously the way forex does. It follows its underlying futures market, with a daily break and reduced weekend availability. Check your platform's schedule rather than assuming a position can be exited at any hour.
Spreads are wider than on forex majors, and wider again outside main hours. Volatility is substantially higher, with sessions of two to three percent movement being unremarkable against roughly half a percent for a currency major.
And as What are commodities and how are they traded? covered, your oil CFD tracks a futures contract and rolls periodically, so the price on your platform may differ from a headline quote.
A lesson from history
In April 2020, WTI futures traded below zero for the first time. Demand had collapsed, storage at Cushing was effectively full, and holders of expiring contracts faced physical delivery they had nowhere to put. They paid to be rid of it.
- Retail CFD traders were affected in various ways depending on their broker, and the episode is worth knowing for one reason only: "the price cannot fall below zero" turned out not to be a rule. Assumptions about what a market cannot do are exactly the assumptions worth holding loosely, and the practical response is the one in Building your own risk rules, which is position sizes that survive events you didn't anticipate.
Key takeaways
Brent is waterborne North Sea crude and prices most internationally traded oil. WTI is US crude delivered at a single landlocked point and reflects American supply conditions
The gap between them moves on transport access, US production, Cushing storage and geopolitical supply risk. They are not interchangeable
A standard contract covers 1,000 barrels, so one cent of movement equals a full pip on a standard forex lot. Forex sizing instincts will produce a position many times too large
Oil demands either a larger account or a tighter stop than the instrument comfortably supports, which is a genuine constraint rather than a detail