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Market insights
Crude oil is the single most traded commodity, with Brent Crude (UK Oil) and West Texas Intermediate (US Oil) dominating the global energy markets and widely regarded as benchmarks for crude oil prices.
Crude oils are classified as either Light or Heavy depending on their API gravity, and as either Sweet or Sour, depending on their sulphur content. These qualities determine the amount of refining required to produce thousands of products, and therefore strongly influence the price. Brent Crude is a Light Sweet blend that is typically priced higher than the OPEC composite price. West Texas Intermediate is lighter and sweeter still, and is typically priced higher than Brent Crude.
The prices of crude oil and other energy contracts such as heating oil and natural gas are influenced by many different factors. Because trading in petroleum products spans many industries it is affected by both high-level geopolitical factors, as well as the trading activities of speculators, and even the weather as a result of disruptions to supply. Energy prices are therefore volatile, and constantly fluctuating.
For energy traders, the spread between Brent Crude and West Texas can offer an interesting trading opportunity as the influence of individual factors driving the prices of these two benchmarks change and the prices converge or diverge.
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