West Texas Intermediate
Also written WTI · West Texas Intermediate (WTI)
A high-quality, low-sulphur crude oil explored and traded within the United States, priced on NYMEX, and one of the world's two benchmark crude grades alongside Brent.
In plain language
Crude oil is not a single, uniform product. Different oil fields produce oil of different quality, and the market prices those differences.
West Texas Intermediate, or WTI, is one of the two grades the world watches most closely. It is explored and physically traded within the United States and priced on the NYMEX exchange.
How it works
The workbook grades crude oil quality on two things: density, measured as API, and sulphur content. It does not spell out which direction is better on either measure, only that WTI and Brent are graded and traded on these two numbers.
By the workbook's own figures, WTI has an API density reading printed as 390 and sulphur content of 0.24%, trading on NYMEX. Brent, its European and African counterpart, has an API reading printed as 380 and sulphur content of 0.4%, trading on ICE. WTI carries roughly half the sulphur content Brent does.
A worked example
On 20 April 2020, WTI crude oil prices fell into negative territory for the first time in history. The workbook's own explanation: the May futures contract was expiring the next day, and there was no demand for physical crude anywhere in the world, because roughly 90% of the world was under lockdown to control the spread of coronavirus.
Because a WTI futures contract is deliverable at Cushing, Oklahoma, and lockdown restrictions on oil movement meant buyers could not take delivery of the physical crude, holders of the expiring contract went on a selling spree rather than take delivery they had nowhere to put. That selling pressure, with almost no buyers left, pushed the price below zero: sellers were, in effect, paying buyers to take the oil off their hands.
Why NISM asks about it
Chapter 4, section 4.8.2 (Energy: Crude Oil), sets out the WTI/Brent comparison, and section 4.9 (Historical Events) covers the April 2020 negative-pricing episode as its own case study. Expect a question comparing WTI and Brent on quality or trading venue, or one testing the cause of the 2020 negative-pricing event.
Common exam traps
- WTI trades on NYMEX; Brent trades on ICE. The two exchanges are frequently swapped in answer options.
- The workbook prints WTI's API reading as "390" and Brent's as "380." Real-world crude API gravity runs roughly 10 to 45, so these almost certainly represent 39.0 and 38.0 with the decimal point lost in the source text. Learn the relative comparison, WTI's API reading is higher than Brent's, rather than treating either printed figure literally as three hundred and ninety.
- The negative pricing in April 2020 was a futures-contract and delivery problem, not evidence that oil itself was worthless. Nobody wanted to take delivery of physical crude at Cushing during a total demand collapse.
- Do not confuse WTI, a crude oil benchmark, with OPEC+, which is a group of producing countries, not a grade of oil.
Where this is taught
Free preparation for NISM Series XVRelated terms
- BrentThe benchmark crude oil price for oil produced in Europe and Africa, sourced from the North Sea and traded on ICE — one of the two global oil pricing benchmarks alongside WTI.
- NYMEXThe New York Mercantile Exchange, the global benchmark exchange for trading energy commodities — where WTI crude oil is priced and traded.
- OPEC+A group of the 13 OPEC members plus Russia and other allied producers that coordinates crude oil output, together shaping a majority of the world's oil supply and reserves.
- CommodityUnder Indian commodity derivatives law, any tangible good other than actionable claims, money and securities — sold in large, uniform quantities and approved by the government and SEBI for futures trading.
- Dollar indexA measure of the strength of the US dollar against six major currencies, used by commodity analysts as a single gauge of currency movement instead of tracking each one.