WTI is a specific grade of crude oil and is one of three major oil benchmarks used by those trading oil contracts, futures, and derivatives.

Understanding West Texas Intermediate (WTI)

WTI is the main oil benchmark for North America as it is sourced from the United States, primarily from the Permian Basin. The oil comes mainly from Texas. It then travels through pipelines where it is refined in the Midwest and the Gulf of Mexico. The main delivery point for physical exchange and price settlement for WTI in Cushing, Oklahoma.

The Cushing hub delivery system consists of 35 (20 inbound and 15 outbound) pipelines and 16 storage terminals.2 The hub has 90 million barrels of storage capacity and accounts for 13% of U.S. oil storage.3 The inbound and outbound capacity is 6.5 million barrels a day. Cushing is known as "The Pipeline Crossroads of the World."

West Texas Intermediate as an Oil Market Benchmark

The significance of a benchmark in the oil market is that benchmarks serve as a reference price for buyers and sellers of crude oil. Oil benchmarks are frequently quoted in the media as the price of oil. Though Brent crude and WTI crude are the most popular benchmarks, their prices are often contrasted. The difference in price between Brent and WTI is called the Brent-WTI spread.