ST Explains: What Brent, futures contract and price cap mean in global energy markets

SINGAPORE РRising energy and electricity prices worldwide have cast a spotlight on international energy markets.

Much of the price increase is linked to stinging sanctions on Russia’s oil and gas exports following its invasion of Ukraine in late February.

This has caused severe disruptions to supply lines into Europe, with the impact reverberating globally as the region scours the world for alternative supplies.

The Straits Times explains some of the common terms used in media reports.


Global oil markets commonly use two benchmarks: the West Texas Intermediate (WTI) and Brent.

The Brent crude benchmark is used to buy and sell more than three-quarters of the world’s traded oil, and is one of the most liquid crude grades.

Physical oil traders prefer the Brent benchmark as they believe it more accurately reflects global supply and demand balances.

The Brent benchmark is made up of crude mostly drilled from the North Sea oilfields. It is traded widely because of the ease of transporting the oil on ships globally.

Brent crude oil futures are primarily traded on the United States-headquartered Intercontinental Exchange’s electronic trading platform.

WTI is a blend of several US domestic crudes that are low in sulphur.

It is drilled and processed in the US, and mostly refined in the Midwest and on the Gulf Coast. WTI is mainly used as a benchmark in the US oil market.

As the contract is made up of crude mostly from inland US, there is restricted access to shipping ports and world transport links.