"What is WTI Crude Oil?"
WTI refers to
"West Texas Intermediate"
which is a U.S. blend
of several streams
of domestic light sweet crude oil.
The delivery point is located
in Cushing, Oklahoma,
which is home to 90 million barrels
of storage capacity.
It is a crucial hub where
extensive infrastructure exists
and serves as a vibrant trading hub
for refiners and suppliers.
The rise in importance
of the U.S. crude market
comes at a challenging time
for other crude oil markets globally.
The catalyst for this transformation
was the sharp rise
in the U.S. oil production,
and the lifting of the
export ban on U.S. crude
that occurred at the end of 2015.
Infrastructure changes being made
in the United States
have become so prevalent
that they are likely to have
a transformational impact
on the region for years to come.
Investment in the U.S. Gulf Coast
has transformed WTI
into a waterborne crude,
with extensive export capacity.
The Seaway Pipeline
links Cushing, Oklahoma,
to the Houston export market,
with 850,000 barrels per day capacity.
The Transcanada Marketlink Pipeline
provides additional capacity
of 700,000 barrels per day
from Cushing to Houston.
Further, the Magellan BridgeTex
and Longhorn Pipelines
carry up to 475,000 barrels per day
from Midland, Texas, to Houston.
The Houston market has
become export-focused,
with a terminal network
with extensive storage capacity
of 65 million barrels,
and an additional 20 million barrels
of storage capacity projected
to come into service in 2017.
Moreover, a number of new terminals
are in the process of being built
along the U.S. Gulf Coast
to handle the rising number
of ships arriving to load crude oil
destined for the international markets.
As U.S. production
has risen substantially,
the role that WTI is likely to play
in terms of being
the marginal supplier of oil
is going to increase significantly,
and the global markets
are likely to adopt WTI pricing
into their crude oil trading.
In Louisiana,
the Louisiana Offshore Oil Port,
LOOP, is planning to transform itself
into a dual-use terminal
that will handle both
exports and imports.
LOOP is expected to allow
Ultra Large Crude Carriers (ULCC)
and Very Large Crude Carriers (VLCCs)
to load for export starting in 2018.
In addition, LOOP operates
70 million barrels of storage capacity
with additional tankage
under construction.
The lifting of the U.S. export ban
has had a significant impact
on global oil flows, and will lead
to greater market efficiencies,
as companies look to gain
arbitrage opportunities
with the improved logistics
of free trade.
As a result, WTI is able
to compete directly
in the global marketplace,
and WTI has become
the price discovery leader
in the crude oil market.
CME Group offers crude oil futures
and options products
to allow participants such
as producers, refiners,
consumers, importers and exporters,
to hedge their risk.
The WTI crude oil futures contract
is physically delivered
and based on a contract size
of 1,000 barrels.
It is priced in U.S. dollars
and cents per barrel.
The WTI crude oil benchmark
is traded electronically
on CME Globex and cleared
via CME Clearport.
For more information on this product
please visit the CME Group
product specifications page.
