| Transactions in crude oil are carried out all over the | | | | the benchmark for US crude prices. |
| world, and there can be a bewildering variety of | | | | Brent |
| contracts and vehicles at different prices, so it can be | | | | Brent, or actually Brent Blend, is a combination of crude |
| confusing for traders looking for a suitable benchmark. | | | | oil from 15 different oil fields in the Brent and Ninian |
| In addition, each type of vehicle has many different | | | | systems in the North Sea. Its API gravity is 38.3 |
| options and futures with various expiry dates, so this | | | | degrees, slightly heavier than WTI but still light, and it |
| brief paper describes the main vehicles for CFD | | | | contains about 0.37% of sulphur, again sweet but less |
| traders. | | | | so than WTI. |
| The two main crude oils which are either traded | | | | Brent blend is ideal for making gasoline and middle |
| themselves or whose prices are reflected in other | | | | distillates, both of which are consumed in large |
| types of crude oil are West Texas Intermediate and | | | | quantities in the North Western Europe, where it is |
| Brent. | | | | normally refined. There are times though when the |
| Types of crude | | | | arbitrage between Brent and other crude oils makes it |
| The main differences in the type of extracted crude | | | | worth exporting. Brent has been known to be refined |
| relate to viscosity and sulphur content. Viscosity is | | | | in the United States (typically the East Coast or the |
| measured by API gravity, which is a measure of how | | | | Gulf Coast) or the Mediterranean region. |
| heavy or light the petroleum liquid is compared to | | | | Brent blend production is also in decline, but it remains |
| water. The higher viscous crudes are called "heavy", | | | | the major benchmark for other crude oils in Europe or |
| and those with a lower API figure are classed as | | | | Africa. It is generally priced at about a $4 per-barrel |
| "light". | | | | premium to the OPEC Basket price or about a $1 to |
| Those crudes with higher sulphur content are called | | | | $2 per-barrel discount to WTI, although on a daily basis |
| "sour", and the lower sulphurs are "sweet". | | | | the pricing relationships can vary greatly. |
| The heavier and more sour the extracted crude is, the | | | | NYMEX Futures |
| more difficult and expensive it is to turn into usable | | | | The NYMEX (New York Mercantile Exchange) futures |
| refined products, so the benchmarks usually chosen | | | | price for crude oil, which is another major benchmark, |
| are for light, sweet crudes. | | | | represents on a per barrel basis the market value of a |
| Typically, there is a price differential between light | | | | futures contract to either buy or sell 1,000 barrels of |
| sweet crudes and heavier sour issues, but this has | | | | WTI or some other light, sweet crude oil at a specified |
| risen in recent years as a result of the decrease in the | | | | time. |
| supply of light, sweet crude, which means. Higher | | | | Although most NYMEX crude oil contracts are never |
| quality crude supplies are always consumed first, and | | | | executed for physical delivery, the NYMEX market |
| the world is now increasingly reliant on a lower quality | | | | supplies important price information to US buyers and |
| product. | | | | sellers of crude oil in the US and around the world, |
| Data from OPEC suggests that global production of | | | | making WTI the benchmark for many different crude |
| light, sweet crude actually declined between 2000 and | | | | oils, especially in the Americas. |
| 2004, so this might be seen as the beginning of the | | | | Typically, the NYMEX futures prices tracks very |
| 'peak oil' scenario. | | | | closely the WTI spot price as above, although since |
| West Texas Intermediate (WTI) | | | | the NYMEX futures contract for a given month |
| This is a major benchmark for oil traders and is the | | | | expires 3 days before WTI spot trading for the same |
| underlying commodity of the New York Mercantile | | | | month ceases, there can be a period in which the |
| Exchange's oil futures contracts. Although WTI has | | | | difference between the NYMEX futures price and the |
| traditionally had a higher price than that of Brent crude, | | | | WTI spot price widens noticeably. |
| recently this has contracted and even reversed at | | | | OPEC Basket Price |
| times. | | | | For more detailed crude oil pricing, OPEC collects |
| WTI is a light crude and with an API gravity of 39.6 | | | | pricing data on a basket of seven crude oils, including: |
| degrees it is lighter than Brent Crude. It contains about | | | | Algeria's Saharan Blend, Indonesia's Minas, Nigeria's |
| 0.24% sulphur, and it is also sweeter than Brent. It is of | | | | Bonny Light, Saudi Arabia's Arab Light, Dubai's Fateh, |
| very high quality and is excellent for refining a larger | | | | Venezuela's Tia Juana Light, and Mexico's Isthmus (a |
| portion of gasoline. | | | | non-OPEC crude oil). |
| Although the production of WTI crude oil is on the | | | | OPEC uses the price of this basket to monitor world |
| decline, it still is the major benchmark of crude oil in the | | | | oil market conditions. Because WTI crude oil is a very |
| Americas. WTI has generally been priced at about a | | | | light, sweet crude, it is generally more expensive than |
| $5 to $6 per-barrel premium to the OPEC Basket | | | | the OPEC basket, which is an average of light sweet |
| price (see below) and about $1 to $2 per-barrel | | | | crude oils such as Algeria's Saharan Blend and heavier |
| premium to Brent, although on a daily basis the pricing | | | | sour crude oils, such as Dubai's Fateh. Brent is also |
| relationships between these can vary greatly. | | | | lighter, sweeter, and more expensive than the OPEC |
| Our analysis of crude oil at Blue Index uses WTI as | | | | basket, although less so than WTI. |