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Types of Crude oil: Pricing Characteristics

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This article provides basic information about the commonly used crude oil terms like WTI, Brent, NYMEX Futures and OPEC.

There are about 160 crude oils that are traded internationally. They vary in terms of their characteristics & quality.

Two crude oils which are either traded themselves or whose prices are reflected in other types of crude oil include West Texas Intermediate (WTI) and Brent. Usually, differences in the prices of these various crude oils are related to quality differences, but some other factors can also influence the price relationships.

West Texas Intermediate

West Texas Intermediate (WTI) crude oil is a high quality crude and is excellent for refining for maximizing of Petrol (Motor Spirit). WTI is a light crude with API gravity of 39.6 degrees. Also it contains about 0.24 percent of sulphur, marking it as “sweet” crude. This set of characteristics, combined with its production location (US), makes it an ideal crude oil to be refined in the United States.

The production of WTI crude oil is on the decline; nevertheless it still is the major benchmark of crude oil. WTI commands a premium of about a $5 - $6 per-barrel over the OPEC Basket price and about $1 - $2 per - barrel over Brent.

Brent

Brent is actually a combination of crude oil from 15 different oil fields in the Brent and North Sea areas. It is a reasonably “light” and sweet crude oil with API gravity of 38.3 degrees and about 0.37 percent of sulphur.

Brent blend is ideal for making Motor Spirit (Petrol) and middle distillates. Brent crude production is also on the decline, but it remains the major benchmark for other crude oils. Prices for other crude oils are generally priced as a differential to Brent, i.e., Brent +/ -.

Brent crude is generally priced at about $3 - $4 per-barrel premium to the OPEC Basket price and about a $1- $2 / barrel discount to WTI.

NYMEX Futures

The NYMEX futures price for crude oil, represents the market-determined value of a futures contract to either buy or sell 1,000 barrels(@ per barrel rate) of WTI at a specified time.. This futures, provides important price information to traders of crude oil, making WTI the benchmark for many different crude oils.

OPEC Basket Price

OPEC collects pricing data on a "basket" of seven crude oils:

  • Algeria's Saharan Blend
  • Indonesia's Minas
  • Nigeria's Bonny Light
  • Saudi Arabia's Arab Light
  • Dubai's Fateh
  • Venezuela's Tia Juana Light and
  • Mexico's Isthmus

OPEC uses the price of this basket to monitor world oil market conditions and its own prices.

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