Comprehensive Guide to International Crude Oil Investment: Differences, Trends, and Small Investor Trading Tips for WTI and Brent

Why Is Crude Oil Worth Paying Attention To?

Crude oil is the lifeblood driving the global economy, and its importance is self-evident. From providing fuel for transportation to industrial manufacturing and everyday products, crude oil’s applications are everywhere. Because it is closely linked to the global economy, oil prices fluctuate frequently and with large swings—these fluctuations themselves contain investment opportunities.

In the global crude oil market, the two most closely watched benchmarks are West Texas Intermediate (WTI) and Brent Crude Oil. According to market research, in an environment of increasing economic uncertainty, crude oil, like other commodities, often contains structural trading opportunities.

Fundamental Differences Between WTI and Brent Crude Oil

Why do prices differ for the same crude oil?

There are over 160 types of crude oil worldwide, classified by origin and chemical properties. To facilitate international trading, the market has gradually established a unified pricing benchmark—using the oil prices from major oil-producing regions as reference standards.

The two most commonly encountered benchmarks represent different markets:

In short, WTI more accurately reflects U.S. market trends, while Brent is the global market barometer.

Features of WTI Crude Oil

WTI crude oil is produced in West Texas, characterized by low sulfur content (about 0.24%) and high quality, making it easy to refine. Its futures contracts are traded on NYMEX, offering excellent liquidity and price transparency, serving as a key reference in the global oil market.

WTI prices often reflect domestic U.S. factors, such as U.S. crude inventories, shale oil production fluctuations, and Gulf of Mexico weather conditions. Standard futures contracts contain 1,000 barrels, mini contracts are 500 barrels, providing lower entry barriers for small investors.

Features of Brent Crude Oil

Brent crude oil is produced in the North Sea region and traded on the ICE in London. Currently, about two-thirds of global crude contracts are priced based on Brent, earning it the title of “international benchmark crude.” Major consumption areas include Northwest Europe, the U.S. East Coast, and Asia (China, India, etc.).

Due to its international nature, Brent prices are more susceptible to global events—including Middle East geopolitical risks, OPEC+ production adjustments, and European energy demand changes. Sulfur content is about 0.37%, with relatively stable output.

Historical Price Trends of WTI and Brent

Long-term Correlation and Spread Analysis

Data from the past 50 years show that WTI and Brent prices tend to move in a significantly positively correlated manner, with price spreads fluctuating based on regional supply and demand changes.

Before 2010, WTI prices were generally higher than Brent, mainly because of better quality and easier refining. However, after 2010, the U.S. shale oil revolution led to a sharp increase in domestic production, but pipeline capacity shortages caused WTI to trade at a discount relative to Brent. Meanwhile, global demand for Brent continued to rise, gradually pushing its price above WTI.

In recent years, with the construction of new pipelines and expanded export capacity in the U.S., along with OPEC+ production cuts, the spread between the two has gradually narrowed.

Early 2022: Impact of Russia-Ukraine Conflict

In early 2022, escalation of the Russia-Ukraine situation caused significant volatility in the oil market. Following Russia’s military actions, Brent crude prices briefly surged past $120 per barrel, and WTI approached $120, reaching multi-year highs. WTI surged over 35% in the short term.

Mid-2022 to Present: Adjustment and Volatility

After reaching highs, oil prices began to retreat, with volatile swings multiple times exceeding 5% in a single day. The Brent premium over WTI widened, reflecting ongoing European energy crisis support for its price.

Main drivers of crude oil price declines include:

1. Expectations of global economic slowdown, with IEA and EIA repeatedly lowering global demand forecasts
2. The U.S. government releasing strategic petroleum reserves on a large scale since 2022, increasing market supply
3. Strengthening dollar putting pressure on dollar-denominated oil prices
4. Despite Western sanctions, Russia maintaining oil exports through discounts and shifting to Asian markets, alleviating supply concerns

Historical Extremes

Highest Price Record: WTI reached $147.27 per barrel in July 2008

Lowest Price Record: On April 20, 2020, WTI futures fell below $0, bottoming at -$40.32 per barrel (mainly due to futures delivery issues and storage shortages). During the same period, Brent also fell below $20 per barrel, illustrating that different benchmarks can diverge significantly.

Factors Influencing Oil Price Trends

Investors trading crude oil need to closely monitor the following core factors:

OPEC and IEA Policy Decisions
As the world’s largest oil-producing organization, OPEC directly influences global supply through quota settings. IEA manages market supply by releasing strategic reserves. Changes in their policies can alter market expectations.

Crude Oil Inventories
Inventory data reflect supply-demand imbalances. Commercial inventories in OECD countries and U.S. shale oil inventories are especially watched, as they represent the largest consuming and producing markets globally.

Geopolitical Risks
Since major oil-producing regions are concentrated in the Middle East and Africa, wars, conflicts, or political instability in these areas can threaten supply and push prices higher. Brent, due to its international benchmark status, is more sensitive to geopolitical events. However, since 2014, U.S. shale oil growth has somewhat reduced the impact of politics on prices.

USD Exchange Rate Movements
Because oil is traded in USD, a strengthening dollar tends to suppress oil prices, while a weaker dollar supports higher prices.

Market Speculation Sentiment
Institutional investors and Wall Street speculators often amplify short-term price swings through futures trading, leading to increased volatility.

Extreme Weather Events
Severe cold or heat waves increase energy demand, while mild weather has the opposite effect, creating seasonal impacts on oil demand.

How Small Investors Can Participate in Oil Investment

For investors with limited capital, there are various options to participate in the oil market, each with pros and cons:

1. Crude Oil Exchange-Traded Funds (ETFs)

How it works: Funds tracking crude oil prices or related indices listed on stock exchanges.

Advantages:

• Lower trading risk
• Similar to stock trading, simple and convenient
• Low entry barrier, high liquidity

Disadvantages:

• Tracking errors possible
• Long-term holding may incur management fees and rollover costs reducing returns
• Overseas ETFs face currency risk

Suitable for: Conservative investors seeking steady returns

2. Investing in Oil Company Stocks

How it works: Indirect exposure by buying stocks of ExxonMobil (XOM), BP, etc.

Advantages:

• High liquidity
• Low investment threshold
• Receive dividends
• Good long-term growth potential

Disadvantages:

• Stock prices affected by company operations, not perfectly correlated with oil prices
• Limited short-term trading flexibility

Suitable for: Long-term investors

3. Crude Oil Futures Contracts

How it works: Trading futures based on near-term or long-term oil prices on futures exchanges.

Advantages:

• Both long and short positions possible
• Leverage via margin increases capital efficiency
• Transparent prices, high liquidity

Disadvantages:

• Standard contract size is large (1000 barrels), requiring high margin (thousands to tens of thousands USD)
• Risk of margin calls (liquidation)
• Rollover costs and time considerations
• Settlement upon delivery

Suitable for: Experienced investors with sufficient capital

Mini futures contracts (usually 100-500 barrels) require lower margins (a few hundred USD), making them more accessible for small investors.

4. Crude Oil Contracts for Difference (CFD)

How it works: Derivative instruments that track oil prices via margin trading.

Advantages:

• Leverage trading (e.g., 1:10) allows small capital to control larger positions
• Flexible two-way trading, profit in both rising and falling markets
• Very low minimum deposit (~$50)
• No physical delivery, more flexible trading

Disadvantages:

• Risk of margin calls (liquidation)
• Requires continuous monitoring of positions

Suitable for: Short-term traders, high-risk tolerance investors

A typical oil CFD covers 1000 barrels; some platforms offer micro-lots (0.01 lot), with very low account minimums, ideal for small capital investors to quickly enter the oil market.

5. Oil Trust Investments

How it works: Investing in oil-related trust funds managed by professionals, often providing returns via dividends.

Advantages:

• Managed by professional teams
• Relatively stable returns
• Diversified risk

Disadvantages:

• Higher investment thresholds
• Longer investment cycles
• Lower liquidity
• Higher fees
• Less directly correlated with oil prices

Suitable for: Conservative investors seeking stable long-term income

Practical Steps for Small Investors to Start Oil Trading

For small investors wanting to participate in oil investment, the basic process includes:

Step 1: Choose suitable trading instruments
Based on capital and risk appetite, select among oil ETFs, CFDs, or mini futures. CFDs are popular for their low entry barrier and flexibility.

Step 2: Select reputable trading platforms
Consider platform security, regulation compliance, trading costs, and product variety. Many platforms offer demo accounts for beginners to familiarize themselves with trading.

Step 3: Conduct market analysis
Before trading, analyze price charts of WTI or Brent, study historical volatility, and identify good entry points.

Step 4: Set risk management parameters
Place stop-loss orders when opening positions—below recent lows for long positions, above recent highs for short positions. Limit risk per trade to 1-2% of account funds.

Step 5: Execute trades
Based on analysis, choose to go long or short, input desired lot size, and let the system execute the order.

Step 6: Close positions for profit or loss
When targets are hit or stop-loss triggered, close the position manually or automatically.

Risk Warning for Investing in the Oil Market

Regardless of the method, the following points must be kept in mind:

Adequate Capital Management
Assess maximum tolerable loss per trade and strictly enforce risk controls, generally not exceeding 1-2% of account funds.

In-depth Price Trend Analysis
Oil prices are influenced by multiple factors. Before trading, thoroughly research historical price movements and understand current drivers rather than trading on intuition.

Set Necessary Protections
Always place stop-loss orders—this is the most effective way to limit losses and a basic habit of professional traders.

Choose Reliable Platforms
Platform choice directly impacts trading experience and fund safety. Opt for regulated, reputable, transparent fee platforms, and select trading instruments suitable for your financial situation.

The oil market is full of opportunities but also risks. Through systematic learning, scientific analysis, and cautious risk management, small investors can also seize opportunities in oil trading.