Oil is an integral part of our everyday lives since it has a paramount importance. Whether we realize or not, it has a presence in our lives and it is a commodity that our world simply cannot function without. But when it comes to crude investing, traders had two choices staring them in the face i.e. Brent Crude and West Texas Intermediate (WTI) oil. The two have bewildered many for quite some time, as they search for the intricacies that make these seemingly commodities inherently different. Beyond the attributes that set these two apart comes the question of which type of crude makes for a better investment.

The investors trading in the energy markets know there is not a lot behind what is separating these two commodities, the basic differentiating factor is that WTI is lighter, sweeter crude, while Brent is sourer. This is generally based on the sulfur content of the underlying fuel with 0.5% being a key benchmark. When oil has a total sulfur level greater than half a percent, then it is considered sour while a content less than 0.5% indicate that an oil is sweeter. Sour oil is more prevalent than its sweet counterpart and it comes from oil sands in Canada, the Gulf of Mexico, some South American nations as well as much of Africa and the Asia Pacific region. While both types are useful, end users generally prefer sweet crude as it requires less processing in order to remove impurities than its sour counterpart. Since Brent is slightly sourer, the commodity often trades at a premium to WTI, though there is a fair amount of speculation as to how long this premium will last or if it will ever be erased. Aside from the differences in their overall makeup, the performance of each commodity is vastly different.

Perhaps the biggest question in an investors mind is how Brent has been able to outdo its competitor by such a large margin, despite both commodities being relatively similar in the grand scheme of things. The past two years have seen a fair amount of volatility from the Middle East, a region that produces a fair amount of the world’s Brent supply. With the region enveloped in chaos and confusion as well as a drop in supply from a number of heavy hitters, it comes as no surprise to see Brent make such large strides especially given that WTI production was relatively unharmed during all of this time.

The only issue that remains is how long the premium between the two will last and what will happen to Brent if the Middle East is able to fall into a more stable pattern. The gains of Brent have been astounding, but this could trap investors into buying into a commodity that is set to fall on weak macroeconomic factors. At the same time, the Middle East has been consistently unstable in recent years, so it may be a while before we see the region calm down and Brent fall. Brent is the best crude option at the moment but it is my observation and the ultimate decision maker is you!

Note: The blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.