WTI vs Brent: How the Oil Fund and Crude Benchmarks Diverge
When it comes to oil benchmarks, many investors are familiar with USO, WTI, and Brent. However, these three terms are not interchangeable.
USO is an exchange-traded commodity pool that uses futures associated with light sweet crude delivered to Cushing to pursue its daily investment objective. In contrast, WTI and Brent are major crude-oil benchmarks that reflect different physical and trading ecosystems.
The prices of WTI and Brent can differ due to regional supply, transportation, storage, crude quality, export capacity, refinery demand, and geopolitical conditions.
USO's primary benchmark is WTI-related futures, which means its price may not directly correlate with the spot price of oil or other benchmarks like Brent. This discrepancy can be attributed to the differences in their underlying markets and trading mechanisms.