Strategy · Inter-Commodity

WTI/BRENT SPREAD TRADE

NeutralDefined riskAdvanced

Overview

Trade the spread between WTI and Brent crude futures. Macro and infrastructure events (pipeline outages, OPEC decisions) reliably move the spread by $2-$5 per barrel.

Setup

1.Track the historical WTI/Brent spread (typically $2-$8).
2.Identify catalysts: OPEC production cuts (widens spread), US export expansion (narrows spread).
3.Open offsetting positions: long the discounted leg, short the premium leg.
4.Size based on tick value and historical spread volatility.
5.Set stop at 2 standard deviations beyond entry spread.
6.Take profit at mean spread or before the catalyst expires.

Max profit

$2-$5 per barrel × contract size × number of contracts.

Max loss

Spread can dislocate further; cap with stops.

Breakeven

Entry spread plus commissions.

When to use

Around scheduled OPEC meetings or infrastructure announcements.

When to avoid

Without a specific catalyst — the spread can drift for months without mean reverting.