Apart from stocks and currencies, crude oil is also a popular investment choice for investors worldwide. In crude oil investment, the benchmark indicators Brent Crude Oil and WTI are certainly familiar among investors.
Brent Crude Oil is a high-quality oil extracted from offshore oil fields in the North Sea near European countries such as the United Kingdom and Norway.
WTI, or West Texas Intermediate, is produced by the United States. It is known for being a lighter and sweeter grade of crude oil due to its low sulfur content, similar to Brent.
The main difference between these two benchmarks is their location, where Brent serves as the pricing standard for the European and Asian markets, while WTI serves as the pricing standard for the American market.
In crude oil trading, two fundamental factors are supply and demand.
• Disruptions or maintenance at major refineries worldwide should be monitored as they impact oil supply.
• OPEC production cuts or increases. If OPEC decides to increase production, prices tend to decrease due to the increased supply in the market.
• Geopolitics. When tensions arise in the Middle East, prices tend to increase due to their role as major oil producers.
• Oil consumers. Pay attention to the demand levels of major oil-consuming countries such as the US, Europe, China, and Japan.
• Seasonality. Typically, during the cold season, there is increased oil product usage for heating purposes.
Traders who trade oil usually follow strategies. What’s important is to understand the fundamental factors that influence oil prices and use strategies that align with their trading style.
Once you understand the supply and demand factors, traders can enter the market using technical analysis. There are various technical indicators and price patterns that can be used to find signals for market entry. It’s not necessary to use many indicators; just use the ones you understand well. However, don’t forget that risk management is also crucial in oil investment.
Through this writing, it is hoped that readers have gained insights into the oil market, what Brent and WTI are, and the differences between these two benchmark indicators.