Oil Market Glossary
Plain-English definitions for the terms you'll see on price charts, in headlines, and across this site.
Brent Crude
Brent crude is the most widely used global oil price benchmark. It's based on oil extracted from the North Sea and serves as the reference price for roughly two-thirds of the world's traded crude. When news outlets report "the price of oil," they usually mean Brent.
WTI Crude
WTI (West Texas Intermediate) is the primary oil price benchmark in North America. It's a lighter, sweeter crude than Brent, priced at the Cushing, Oklahoma delivery point. WTI and Brent often move together, but the gap between them — the spread — can shift based on regional supply dynamics.
Benchmark
A benchmark is a reference price that buyers and sellers use to negotiate oil contracts. Brent and WTI are the two major global benchmarks. Other regional benchmarks exist (Dubai, Urals), but most international contracts are priced relative to Brent or WTI.
Spot Price
The spot price is the current market price for immediate delivery of a barrel of oil. It reflects what buyers are willing to pay right now, as opposed to futures prices which reflect expectations about the future. Spot prices change constantly during trading hours.
Futures
Oil futures are contracts to buy or sell oil at a set price on a future date. They're traded on exchanges like NYMEX and ICE. Futures prices can diverge from spot prices based on market expectations — when traders expect prices to rise, futures trade higher than spot (contango), and vice versa.
Spread
In oil markets, a spread is the price difference between two related benchmarks or contract dates. The Brent-WTI spread measures the gap between the two major benchmarks. A widening spread often signals regional supply imbalances or shifting trade flows.
OPEC
OPEC (Organization of the Petroleum Exporting Countries) is a cartel of oil-producing nations that coordinate production levels to influence global prices. When OPEC announces a production cut, oil prices typically rise. The expanded group, OPEC+, includes non-member allies like Russia.
Production Cut
A production cut is a deliberate reduction in oil output, usually coordinated by OPEC or OPEC+. The goal is to tighten supply and push prices higher. Cuts are measured in barrels per day and can have immediate effects on market sentiment, even before the actual supply reduction takes hold.
Barrel
A barrel is the standard unit of measurement for crude oil, equal to 42 U.S. gallons (about 159 liters). Oil prices are quoted per barrel. Global consumption runs around 100 million barrels per day, which is why even small per-barrel price changes have massive economic impact — including at the gas pump.
Refinery
A refinery is an industrial facility that processes crude oil into usable products like gasoline, diesel, jet fuel, and petrochemicals. Refinery capacity and utilization rates affect fuel supply and pricing. When refineries shut down for maintenance or weather events, fuel prices can spike even if crude prices stay flat.
Inventory
Oil inventory refers to the volume of crude oil and petroleum products held in storage. The U.S. EIA publishes weekly inventory reports that markets watch closely. Rising inventories suggest oversupply (bearish for prices); falling inventories suggest tightening supply (bullish). These reports are among the most market-moving data points in energy trading.
Sanctions
Sanctions are government-imposed restrictions on trade with specific countries. When major oil producers like Russia, Iran, or Venezuela face sanctions, their oil exports are restricted, reducing global supply and pushing prices higher. Sanctions can also reroute trade flows and create pricing distortions across benchmarks.
Contango
Contango is a market condition where futures prices are higher than the current spot price. It signals that traders expect prices to rise, or that storage costs and carrying charges make holding oil for future delivery more expensive. Extended contango can indicate oversupply in the near term. See also: oil price history.
Backwardation
Backwardation is the opposite of contango — futures prices are lower than the current spot price. It typically signals tight near-term supply or strong immediate demand. Backwardation often appears during supply disruptions, geopolitical crises, or when inventories are unusually low.