What Is WTI Crude Oil? West Texas Intermediate Explained

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West Texas Intermediate (WTI) is a grade of light, sweet crude oil produced in the United States and the main price benchmark for oil in North America. When a news report quotes “the price of oil” in dollars per barrel, it is usually citing either WTI or its international counterpart, Brent. WTI’s price is set at a physical delivery hub in Cushing, Oklahoma, and is discovered mainly through futures contracts traded on the New York Mercantile Exchange (NYMEX).

What “West Texas Intermediate” Means

Each word in the name describes the oil:

• West Texas refers to where the oil historically came from. Today the grade is drawn mostly from the Permian Basin in West Texas and southeastern New Mexico, the most productive oil field in the country.
• Intermediate describes its physical character. WTI sits between very light condensates and the heavier crudes that require more intensive processing.

Two properties define crude quality: density and sulfur content. Density is measured by API gravity, an industry scale on which higher numbers mean lighter oil. WTI is a light crude, commonly cited at an API gravity of around 39 to 40 degrees. Light oil yields a larger share of high-value fuels per barrel.

Sulfur determines whether oil is “sweet” or “sour.” Crude with less than 0.5% sulfur is considered sweet. WTI’s sulfur content of about 0.24% to 0.34% puts it comfortably in the sweet category. Sweet crude needs less processing to meet fuel sulfur limits, so refiners can turn it into finished products at lower cost. This is different from West Texas Sour (WTS), a separate grade from the same region with higher sulfur content that trades at its own price.

What WTI Refines Into

Because it is light and sweet, WTI suits transportation fuels. A refinery running WTI typically gets a high proportion of:

• Gasoline, the largest product by volume for most U.S. refineries
• Diesel and heating oil (distillates)
• Jet fuel
• Smaller amounts of propane, butane and petrochemical feedstocks

Heavier, sourer crudes produce more residual fuel oil and asphalt unless a refinery has complex equipment (such as cokers and hydrotreaters) to upgrade them.

Cushing, Oklahoma: Where WTI Is Priced

WTI oil moves by pipeline from Texas to refineries in the Midwest and along the Gulf Coast. The central junction in that system is Cushing, Oklahoma, often called “The Pipeline Crossroads of the World.” Cushing is the official delivery point for NYMEX WTI futures, which means a futures contract held to expiry settles by delivering physical barrels there.

The infrastructure at Cushing explains why the hub works as a pricing point:

• 35 pipelines (20 inbound and 15 outbound)
• 16 storage terminals
• About 90 million barrels of storage capacity, roughly 13% of U.S. oil storage
• Inbound and outbound capacity of about 6.5 million barrels per day

Because so much crude can be stored and redistributed at one location, Cushing inventory levels are closely watched. When storage there fills up, there is little room for delivered barrels, and near-term WTI prices can fall sharply relative to later-dated contracts. The most extreme case came on April 20, 2020, when the expiring May WTI futures contract settled below zero for the first time: with demand collapsing during pandemic lockdowns and Cushing storage tight, some holders of long contracts paid others to take delivery obligations off their hands.

Reading “Cushing, OK WTI Spot Price FOB”

The U.S. Energy Information Administration publishes a series called “Cushing, OK WTI Spot Price FOB (Dollars per Barrel).” Each part of the label means:

• Cushing, OK: the price applies to oil at the Cushing hub.
• WTI: the grade of crude.
• Spot price: the price for oil bought for near-immediate delivery, as opposed to a futures price for delivery in a later month.
• FOB (free on board): the price excludes the cost of transporting the oil onward from Cushing. The buyer pays freight from that point.
• Dollars per barrel: the unit. One barrel equals 42 U.S. gallons.

The same logic applies to the “WTI/USD” quote shown by many brokers: it is the price of one barrel of WTI expressed in U.S. dollars, usually derived from the nearby futures contract.

How WTI Is Traded

NYMEX, now part of CME Group, launched its light sweet crude oil futures contract in 1983, and that contract became the standard way to price WTI. Its main features:

• Contract size: 1,000 barrels
• Quote: U.S. dollars and cents per barrel
• Settlement: physical delivery at Cushing for contracts held through expiry
• Contract months: a series of monthly contracts extending years into the future

Most futures traders never take delivery. Producers use futures to lock in selling prices, airlines and refiners use them to fix input costs, and speculators trade them for price exposure, closing or rolling positions before expiry.

An example shows the mechanics. Suppose (hypothetically) a trader buys one WTI futures contract at $70.00 per barrel and later sells it at $72.50. The gain is $2.50 × 1,000 barrels = $2,500, before commissions and exchange fees. A move the other way by the same amount produces a $2,500 loss. Because futures are traded on margin, the trader’s deposit is much smaller than the contract’s full value, so gains and losses are large relative to the money posted.

WTI vs. Brent

A crude oil benchmark is a reference price that buyers and sellers use to value other grades. Brent, drawn from North Sea fields, is the dominant global benchmark and is used for about two-thirds of oil contracts worldwide. WTI leads in North America. The two are the world’s most important benchmarks because both are high-quality crudes with deep, liquid markets.

Both grades are sweet, but WTI is slightly sweeter and lighter, so in theory it should command a premium. In practice, each benchmark responds to its own supply and demand. The difference between the two prices is called the Brent-WTI spread.

Since the U.S. shale boom increased production, WTI has often traded at a discount to Brent. Two factors drive this. First, growing U.S. output raised the supply of WTI-linked crude. Second, Brent is priced at sea and connects directly to many international markets, while WTI is priced at an inland hub. Getting WTI to overseas buyers requires pipeline transport to the Gulf Coast and then shipping, and those costs make it harder for WTI to compete with Brent on price abroad.

The relationship has changed as U.S. crude reached world markets. Congress lifted the long-standing ban on most U.S. crude oil exports in December 2015, and WTI shipped from the Gulf Coast now competes directly with other light sweet grades. Some WTI is also priced at locations other than Cushing, such as Midland, Texas, and Houston, reflecting where the barrels actually sit.

Is the U.S. a Net Exporter or Importer of Oil?

The United States is a net exporter of petroleum. In 2023, it imported about 8.51 million barrels per day from 86 countries and exported about 10.15 million barrels per day to 173 countries and three U.S. territories. These totals cover crude oil, hydrocarbon gas liquids, refined products and biofuels, not crude alone. Imports remain large partly because many U.S. refineries are configured for heavier, sourer crude than the light sweet oil from shale. The top five sources are Canada, Mexico, Saudi Arabia, Iraq and Brazil. For WTI, export capacity gives U.S. producers access to global buyers, which links WTI more closely to Brent, while imports mean domestic refiners are not limited to WTI.

What Moves the WTI Price

WTI responds to broad commodity forces plus a few specific to its location:

• U.S. production levels, especially shale output from the Permian Basin
• Cushing inventories and storage capacity
• Refinery demand, which shifts with seasonal maintenance and gasoline demand in summer driving season
• Global supply decisions, including output policy by major producing countries
• Economic growth, since oil demand rises and falls with industrial activity and travel
• The U.S. dollar, because oil is priced in dollars; a stronger dollar makes oil more expensive for buyers using other currencies
• Pipeline and export capacity, which affects how easily WTI reaches coastal and overseas buyers

Ways to Get Exposure to WTI

Individual investors rarely buy physical barrels. Common routes include:

• Futures and options on NYMEX, which offer direct exposure but involve leverage, margin calls and contract expiry.
• Exchange-traded funds and notes that hold WTI futures. They track those futures, not the spot price, and must roll expiring contracts into later ones. When later contracts cost more (contango), each roll buys fewer barrels and the fund can lag the spot price over time. When later contracts cost less (backwardation), the roll can work in the fund’s favor.
• Energy company stocks, whose earnings depend on oil prices but also on costs, debt and management, so they call for fundamental analysis rather than tracking crude alone.
• CFDs and spot oil products offered by brokers in some countries (not available to U.S. retail clients), which reference WTI prices without delivery and carry financing charges on overnight positions.

FAQs

The Bottom Line

WTI matters to anyone who follows oil prices, trades energy futures, or holds funds and stocks tied to crude. Its price reflects U.S. shale output, Cushing storage, and the cost of moving barrels to the coast and overseas. Investors using futures-based funds should expect returns that can drift from the spot price because of contract rolls, while futures traders face leverage that magnifies both gains and losses.