WTI–Brent spread

WTI and Brent are two crude benchmarks that usually move together but not in lockstep. A spread rule trades the difference when it is extreme versus its own history, long the cheaper contract and short the richer one, and flattens when the gap normalizes. It is a relative-value trade between futures, not a view that oil will rise, and it is not riskless arbitrage.

Not investment advice. Nothing here is a recommendation to buy or sell anything. Backtests and historical studies are not guarantees, and a rule that worked in one sample can fail in the next. Trading can lose money. Links are for education, not endorsements. Do your own research.

Rules

Build a ratio or difference of nearby WTI and Brent futures. When the spread's z-score versus a long window exceeds a threshold, short the rich leg and buy the cheap leg in a hedge ratio you set in advance. Exit at the mean or at a time stop. Roll both legs on a schedule. Cap the position, because the spread can trend for years when transport, quality, or sanctions change.

Where AI fits

AI can align contract months, compute the hedge ratio from a trailing window only, and model two sets of roll costs. It can flag regime breaks, such as a spread that has left every historical band, and force a smaller size. Optimizing the z-score on the full history will make the band look smarter than it was.

Markets

WTI and Brent crude futures. Related products and ETFs do not track the same spread.

Timeframes

Daily signals. Holds can last weeks. Rolls are on the contract calendar.

Risks

The spread has structural breaks. Margin is required on both legs, and one leg can gap through a limit. A 'mean' estimated on a quiet decade is the wrong mean after a logistics shock. This is not a locked arbitrage.

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