Crude oil
Oil is the most watched price in the world and the most misread. Almost every question about it comes down to two numbers: spare capacity and inventories.
At a glance
- Traded as
- Crude oil by grade, quoted per barrel of 42 US gallons
- Benchmarks
- Brent for most of the world, WTI for North America
- World supply
- Roughly 102 million barrels a day of liquids in 2024
- Largest producer
- The United States, about a fifth of world liquids supply
What is actually being traded
Crude oil is not one product. It varies by density - light or heavy - and by sulphur content - sweet or sour - and those differences decide which refinery can process it and what it is worth. A light sweet barrel yields more gasoline and diesel with less processing, which is why it commands a premium over a heavy sour one from the same day.
The market solves this with benchmarks. Brent, a blend of North Sea grades, prices roughly two thirds of internationally traded crude. West Texas Intermediate is the North American reference and is delivered inland at Cushing, Oklahoma. Dubai and Oman serve as the reference for barrels heading to Asia. Every other grade trades at a differential to one of them.
Barrels are also not the whole story of supply. Headline world supply figures include condensates and natural gas liquids alongside crude proper, which is why one source says about 82 million barrels a day and another says 102 million and both are correct.
Brent and WTI are two different physical markets, not two names for oil. The spread between them is a shipping and logistics story, and it moves.
What it is used for
Oil is a transport fuel first and a chemical feedstock second. Refineries split a barrel into gasoline, diesel and gasoil, jet fuel, naphtha, fuel oil and liquefied petroleum gases, and the relative value of those products - the crack spread - determines how hard refiners bid for crude.
This matters for forecasting because the uses have very different futures. Road fuel demand is where electrification bites, aviation and shipping have no substitute at scale yet, and petrochemical feedstock demand keeps growing with plastics. A story about peak oil demand is really a story about one of those three.
- Diesel and gasoil
- 28%
- Gasoline
- 26%
- Naphtha, LPG and petrochemical feedstock
- 17%
- Other products
- 13%
- Fuel oil
- 8%
- Jet fuel and kerosene
- 8%
Source: IEA Oil Market Report
Where it comes from
The United States is the largest producer and has been since the shale revolution, but its barrels behave differently from Gulf barrels: shale wells decline fast and can be drilled quickly, which makes American supply responsive to price on a timescale of months rather than years.
Saudi Arabia matters for a different reason. It holds most of the world's spare capacity - production it can bring online within about ninety days - and that cushion, not its output, is what keeps a supply shock from becoming a price spiral. When spare capacity is thin, the same piece of news moves the price far more.
| Name | Share |
|---|---|
| United States | 20% |
| Russia | 11% |
| Saudi Arabia | 11% |
| Canada | 6% |
| Iraq | 4% |
| Rest of world | 48% |
Source: IEA and EIA supply estimates
Behind the subscription
The rest of this entry is the part that changes a decision: what moves the price, which contract sets it, who ships it and where that can be cut off.
What moves the price
The forces that set the oil price, sorted by direction and weight - spare capacity, OPEC+ policy, inventories, shale response, sanctions and the demand cycle.
Where it is traded
The contracts that settle an oil market - Brent, WTI and Dubai - with sizes, tickers and the delivery mechanics that make them behave differently.
Who ships it, and where it can be cut off
Who exports crude, who buys it, and the four maritime chokepoints where a single blockage reprices the entire market.
How this shows up in prediction markets
Which benchmark settles an oil question, what the deadline does to it, and the checks that separate a real supply shock from a rerouting.
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Frequently asked questions
- What is the difference between Brent and WTI?
- Brent is a North Sea blend that prices most internationally traded crude and settles financially; WTI is the North American benchmark, physically delivered inland at Cushing, Oklahoma. They usually move together, and the spread between them widens when US export logistics or North Sea supply intervene.
- Why does the oil price react so strongly to small disruptions?
- Because supply and demand each sit near a hundred million barrels a day and the balance between them is measured in single millions. A one percent shortfall is enormous in this market, and how far the price moves depends on how much spare capacity exists to fill it.
- How important is the Strait of Hormuz?
- Roughly a fifth of global petroleum liquids passes through it, and there is no alternative route with comparable capacity. That is why threats to it are priced immediately, even when nothing physically stops.
- Can oil really go negative?
- It happened once, to the expiring WTI contract in April 2020, because that contract requires physical delivery at a landlocked hub whose storage had filled. It was a storage failure at one location rather than a statement that oil was worthless.
Primary sources
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