So how are the WTI and Brent Crude markets different?
First of all, WTI and Brent Crude are each major benchmarks for oil pricing. WTI is the main oil benchmark for North America, and Brent Crude is the International benchmark. WTI crude oil is sourced in North America, primarily from Texas, whereas Brent Crude is sourced from oil fields in the North Sea, near Norway.
Brent has unlimited storage capacity for oil producers because it's produced at sea. The WTI crude is produced in landlocked areas, leaving producers vulnerable to running out of storage capacity.
All of this helps explains the recent oil glut. In West Texas, as demand for oil has fallen off a cliff in the wake of the coronavirus pandemic, oil producers, flush with inventory, had nowhere to physically store all that excess oil. Producers had two options: close their wellheads or sell the oil at a negative price.
The producers decided to sell at a negative price. In that moment, selling a barrel meant giving cash to the buyer along with the barrel. And that would actually be less costly to the oil producer than closing wellheads, which is expensive to do.
To understand the differences between WTI and Brent crude, and how the oil market has been impacted by these subtle differences, watch the quick video above.