Glossary
Crude Oil
Unrefined petroleum, traded mainly as WTI and Brent futures, and a key driver of energy stocks and inflation.
Crude oil is petroleum as it comes out of the ground, before refineries turn it into gasoline, diesel, jet fuel and chemicals. It is the most heavily traded Commodity in the world, and its price ripples through transport costs, consumer Inflation and the earnings of energy companies, airlines and chemical makers.
Benchmarks and contracts
Oil is quoted in US dollars per barrel, with one barrel equal to 42 US gallons. Two benchmarks dominate:
- West Texas Intermediate (WTI), a light, low-sulfur US crude. Its main futures contract trades on NYMEX and is priced for delivery at Cushing, Oklahoma.
- Brent, a blend from North Sea fields, traded on ICE and used to price most of the world's seaborne crude.
Brent usually trades a few dollars above WTI, though the gap moves with shipping costs and regional supply.
What moves the price
Supply decisions by OPEC and its allies (OPEC+), US shale output, inventories, refinery demand, the strength of the dollar, and wars or sanctions in producing regions all matter. Traders watch the weekly US inventory report from the Energy Information Administration, released on Wednesdays in most weeks. Prices can swing hard: WTI fell from above $100 in mid-2014 to below $30 in early 2016, and its expiring contract briefly settled below zero in April 2020 when storage filled up (see Contango).
How investors get exposure
Few individuals trade oil futures directly. More common routes are oil-producer stocks in the energy Sector and futures-based ETFs, whose returns can differ sharply from the spot price because of roll costs.