UPSC Prelims 2020 Q53: Indian Economy – Financial Markets & Capital Markets
- (a) Crude oil
- (b) Bullion
- (c) Rare earth elements
- (d) Uranium
Answer: (a) Crude oil
Explanation
West Texas Intermediate (WTI): Commodity Definition
| Option | Correct? |
|---|---|
| Crude oil | YES |
| Bullion (gold/silver) | No |
| Rare earth elements | No |
| Uranium | No |
West Texas Intermediate (WTI): A specific grade of crude oil produced in West Texas (Permian Basin, Texas/New Mexico). Also called Texas Light Sweet Crude.
Key characteristics:
- API gravity: 39-40° (light)
- Sulfur content: <0.5% (sweet/low sulfur)
- Benchmark crude for US oil markets
- Traded on NYMEX (crude oil futures)
- Price reference for global oil (alongside Brent)
Answer: (a) Crude oil.
Why each option is right or wrong
- (a) CORRECT. WTI is a grade of crude oil (light, low-sulfur), benchmark for US oil prices.
- (b) Incorrect. Bullion is gold/silver, traded separately.
- (c) Incorrect. Rare earths are processed minerals, not crude grades.
- (d) Incorrect. Uranium is nuclear fuel, separate commodity market.
Key point
WTI vs Brent: WTI = US oil benchmark (Permian Basin). Brent = North Sea benchmark (UK/Norway). Both are "light sweet crude." Brent more widely used globally.
Remember
The term 'West Texas Intermediate' found in news refers to a specific GRADE OF CRUDE OIL produced in the Permian Basin of Texas. It is a light, low-sulfur crude oil that serves as a benchmark for US oil prices.
Common mistakes
- Confusing WTI (grade of crude) with general petroleum. WTI is one specific grade among many.
- Assuming all crude oils are identical. API gravity and sulfur content vary significantly (affects refining, price).
- Missing that WTI price varies from Brent due to transport costs, market dynamics, not quality.
Exam tip
Oil grades: Heavy/Light (density - API gravity). Sour/Sweet (sulfur %). WTI = light + sweet = high-demand. Heavy sour crude (Venezuela, Middle East) less desirable, lower price.
Sources
- NYMEX - WTI Crude Oil Futures Contract Specifications
- EIA - Crude Oil Market Primer