Benchmarking Crude Oil

These are many different varieties and grades of crude oil. Crude Oil quality is measured by its density and sulphur content. Benchmark oils are used as references when pricing oils. There are approximately 161 different benchmark oils, of which the main three West Texas Intermediate, Brent Crude, and Dubai Crude. Their pricing is used as a barometer for the entire petroleum industry. The pricing is usually quoted based on F.O.B. (free on board, the point at what the seller transfers ownership of the goods to the buyer without consideration of final delivery costs). The delivery locations are usually sea ports close to the oil fields from which the crude was obtained.

Crude oil is considered "heavy" if it has long hydrocarbon chains, or "light" if it has short hydrocarbon chains: an API gravity of 34 or higher is "light", between 31-33 is "medium", and 30 or below is "heavy". Crude is considered "sweet" if it is low in sulphur content (< 0.5%/weight), or "sour" if high (> 1.0%/weight). Generally, the higher the API gravity (the "lighter" it is), the more valuable the crude.

Brent Crude is typically priced at about $2 over the WTI Spot price, which is typically priced $5 to $6 above the EIA's Imported Refiner Acquisition Cost (IRAC) and OPEC Basket prices. 

Crude oil is the most actively traded commodity and is bought and sold in “contracts.” A contract trades in units of 1,000 barrels of oil and benchmarks help to determine the price of a barrel of oil in a contract.

Why ?

There is always a spread between WTI, Brent and other blends due to the transportation cost. This is the price that controls world oil market price.

Types

WTI @ Cushing

West Texas Intermediate is used primarily in the U.S. It is light (API gravity) and sweet (low-sulfur) with an API gravity of 39.6 degrees.It contains 0.24% sulphur.

Brent @ North Sea (Europe) Brent Blend / London Brent / and Brent petroleum

Brent is not as light or as sweet as WTI and it is still a high-grade crude with an API gravity of 38.06.  The sulfur content is 0.37%. 

Brent Crude is a mix of crude oil from 15 different oil fields in the North Sea.

The price of Brent Crude is used to set prices for roughly 2/3 of the world’s oil. It is mostly refined in Northwest Europe and is also called Brent Blend, London Brent, and Brent petroleum. The Brent field is located in the East Shetland Basin, halfway between Scotland and Norway.

Edmonton Par and Western Canadian Select (WCS) 

They are benchmarks crude oils for the Canadian market. 

Both Edmonton Par and West Texas Intermediate are high-quality low sulfur crude oils with API gravity levels of around 40°. 

In contrast, WCS is a heavy crude oil with an API gravity level of 20.5°.

OPEC Reference Basket (ORB)

This is not a specific crude, but rather is a weighted average of petroleum that comes from OPEC countries. There are currently 11 different oils combined into the ORB. It averages an API gravity, with the present combination, of 32.7 degrees and has a sulfur content of 1.77%. It was recently changed to high density (decreased the API) and increased the sulfur content of the basket.

The OPEC basket is slightly heavier and more sour than Brent. 

Dubai Crude / Fateh

Dubai Crude is light and sour, with an API gravity of 31 degrees and a specific gravity of 0.871. Its sulfur content is 2%, It is generally used for pricing oil that comes from the Persian Gulf. Its importance comes not only from its quality, but also from the fact that it was the only freely traded oil from the Middle East until recently.

Tapis

Tapis is often referred to as the “World’s Costliest Oil” and comes from a single field in Malaysia. Its value comes from the fact that WTI and Brent Crude are difficult and expensive to export to Asia and because it is of extremely high quality. Tapis has an API gravity of 45.2 degrees and a sulfur content of 0.0343%. These are exceptional numbers, indicating that Tapis is very light and very sweet. Unfortunately, output from the Tapis field has been falling steadily since 1998.

Bonny Light

Bonny light comes from Nigeria and is a light, sweet oil.