WTI Crude Oil (WTI)

The most actively traded commodity in the world. WTI (West Texas Intermediate) is the benchmark for U.S. oil prices.

2-Minute Beginner Summary

WTI Crude Oil is the price benchmark for oil produced in the United States. When news talks about "oil prices," they usually mean WTI. It affects everything from gas prices at the pump to airline tickets. Oil prices rise when demand is strong (economies growing) or supply is tight (OPEC cuts, geopolitical tensions). They fall when economies slow down or when there is too much oil in the market.

What Is WTI Crude Oil?

WTI (West Texas Intermediate) is a grade of crude oil used as a benchmark in oil pricing. It is a light, sweet crude oil extracted from U.S. oil fields, primarily in Texas, Louisiana, and North Dakota.

Why WTI Matters

Oil is the lifeblood of the global economy. WTI prices directly impact gasoline costs, transportation expenses, and inflation. Energy stocks, airlines, and manufacturing all move with oil prices.

What Moves the Price?

Top 6 drivers affecting WTI Crude Oil prices:

OPEC+ Production Decisions

The OPEC+ cartel controls ~40% of global oil production. Their production cuts or increases directly move prices.

U.S. Shale Production

American shale producers can quickly ramp up when prices rise, adding supply and capping price rallies.

Global Economic Growth

Oil demand tracks GDP growth. Strong economies = more driving, flying, shipping = higher demand.

U.S. Dollar Strength

Oil is priced in dollars. A stronger dollar makes oil more expensive for foreign buyers, reducing demand.

Geopolitical Tensions

Conflicts in oil-producing regions (Middle East, Russia) can disrupt supply and spike prices.

Inventory Levels

Weekly EIA inventory reports move prices. Draws (less inventory) are bullish; builds (more inventory) are bearish.

Market Structure

Spot vs Futures

WTI trades primarily through futures contracts on NYMEX. Spot prices exist but most trading happens in the futures market. The front-month contract is the most liquid.

Contango & Backwardation

WTI often trades in contango (future prices higher than spot) due to storage costs. During supply crunches, it can flip to backwardation (spot higher than futures), signaling immediate demand.

Key Exchanges: NYMEX (CME Group), ICE Futures

Contract Size: 1,000 barrels per contract

Seasonality

WTI follows a seasonal pattern tied to driving and heating demand.

Peak Months: May, June, July, August

Low Months: February, March, September

Prices often rise in spring as refineries prepare for summer driving season, peak in summer, and soften in fall. Winter can see strength from heating oil demand.

Macro Sensitivity

WTI is negatively correlated with the U.S. dollar (stronger dollar = lower oil prices). It rises with inflation expectations and economic growth. Higher interest rates tend to slow economies, reducing oil demand.

USD Sensitivity: negative
Inflation Sensitivity: positive
Growth Sensitivity: positive
Rates Sensitivity: negative

Stock & ETF Exposure Map

Related Stocks

Related ETFs

Key Calendar & Reports

EIA Weekly Petroleum Status Report (Weekly (Wednesday))

Source: U.S. Energy Information Administration. Reports U.S. crude oil inventories, production, and refinery utilization

API Weekly Statistical Bulletin (Weekly (Tuesday))

Source: American Petroleum Institute. Industry estimate of U.S. inventory changes

OPEC+ Meeting (Monthly/Quarterly)

Source: OPEC Secretariat. Production quota decisions from the cartel

Baker Hughes Rig Count (Weekly (Friday))

Source: Baker Hughes. Active drilling rigs in the U.S.

How to Trade WTI Crude Oil

Most retail investors access WTI through ETFs like USO or UCO, or through energy sector stocks. Futures contracts trade on NYMEX with 1,000-barrel contract sizes.

Frequently Asked Questions

What is the difference between WTI and Brent crude?

WTI is the U.S. benchmark, lighter and sweeter (lower sulfur). Brent is the international benchmark from the North Sea. Brent typically trades at a small premium to WTI due to global shipping dynamics.

Why do oil prices go negative?

In April 2020, WTI briefly went negative because storage was full and no one wanted physical delivery. This is rare and only happens with extreme supply/demand imbalances.

How do oil prices affect gas prices?

Crude oil accounts for about 50-60% of gasoline prices. Refining, taxes, and distribution make up the rest. Gas prices follow oil with a lag of 1-2 weeks.

What is OPEC and why does it matter?

OPEC (Organization of the Petroleum Exporting Countries) is a cartel of 13 oil-producing nations. With OPEC+ (including Russia), they control ~40% of global production and can move prices by adjusting output.

Is oil a good inflation hedge?

Yes, historically. Oil prices tend to rise with inflation, making energy stocks and commodities popular during inflationary periods.

What happens to oil demand with electric vehicles?

EV adoption is growing but oil demand for transportation is expected to peak around 2030-2035. Petrochemicals and aviation will maintain some demand.

How do I invest in oil without buying barrels?

ETFs (USO, XLE), energy stocks (XOM, CVX), or energy mutual funds provide exposure without physical ownership or futures complexity.

What is contango and why does it hurt oil ETFs?

Contango means futures prices are higher than spot prices. Oil ETFs must "roll" contracts monthly, selling low and buying high, which erodes returns over time.

Glossary

Barrel (bbl): Standard unit of oil measurement equal to 42 U.S. gallons or about 159 liters.
Contango: Market condition where future prices are higher than current spot prices, typically due to storage costs.
Backwardation: Market condition where spot prices are higher than futures, indicating immediate supply tightness.
Sweet Crude: Oil with low sulfur content (<0.5%), easier and cheaper to refine.
Light Crude: Oil with low density, flows easily and produces more gasoline when refined.
Crack Spread: The price difference between crude oil and refined products like gasoline and diesel.
Rig Count: Number of active drilling rigs, an indicator of future production.
SPR (Strategic Petroleum Reserve): U.S. government emergency oil stockpile of ~700 million barrels.
E&P (Exploration & Production): Companies that find and extract oil, like ConocoPhillips or EOG Resources.
Integrated Oil Company: Companies involved in all stages from drilling to refining to retail (Exxon, Chevron).