Crude Oil

Uploaded by : DreamGains Financials, Posted on : 06 Aug 2016


In its natural, unrefined state, crude oil ranges in density and consistency, from very thin, light weight and volatile fluidity to an extremely thick, semi-solid heavy weight oil. There is also a tremendous gradation in the color that the oil extracted from the ground exhibits, ranging all the way from a light, golden yellow to the very deepest, darkest black imaginable.

Crude oil is a naturally- occurring substance found in certain rock formations in the earth. To extract the maximum value from crude, it needs to be refined into petroleum products. The best-known of these is gasoline, or petrol. Others include liquefied petroleum gas (LPG), naphtha, kerosene, gas oil and fuel oil.

In crude oil industry, there are oil names such as Brent Light Crude oil and Bonny Light and there are oil types such as light, heavy, sweet and sour. Light oil has a low density viscosity, while heavy oil is of higher density.

Sweet oil has less sulfur, and sour oil has excessive sulfur. The world market prefers light, sweet crude oil, largely because it requires less refinement and production time before going to market.

Futures contracts for crude oil are traded at the New York Mercantile Exchange (NYMEX), Intercontinental Exchange (ICE), Dubai Mercantile Exchange (DME), Multi-Commodity Exchange (MCX), India’s National Commodity and Derivatives Exchange (NCDEX) and the Tokyo Commodity Exchange (TOCOM).

There are actually over 160 different oils traded on the market these days, However, the price of most of them are pegged to one of three primary benchmarks:


  • WTI refers to oil extracted from wells in the U.S. and sent via pipeline to Cushing, Oklahoma.
  • WTI is an extremely high quality crude oil which is greatly valued for the fact that it is of such premium quality, more and better gasoline can be refined from a single barrel than from most other types of oil available on the market.
  • The WTI “API Gravity” is 39.6 degrees, which makes it a “light” crude oil, with only 0.24% sulfur, which makes it a “sweet” crude oil.

The term “API Gravity” refers to the “American Petroleum Institute Gravity”, which is a measure that compares how light or heavy a crude oil is in relation to water. If an oils “API Gravity” is Greater than 10 then it is lighter than water and will float on it. If an oils “API Gravity” is less than 10, it is heavier than water and will sinks. These combined qualities as well as location make WTI a prime crude oil to be refined in the United States, which is by far, the largest gasoline consuming country on the planet.


  • Brent Blend is actually a combination of different oils from 15 fields throughout the Scottish Brent and Ninian Systems located in the North Sea.
  • These days, “Brent” actually refers to oil from four different fields in the North sea: Brent, Forties, Oseberg and Ekiofisk.
  • Its “API Gravity” is 38.3 degrees, which makes it a “light” crude oil, but clearly not quite as “light” as WTI. It also contains about 0.37% sulfur, which makes it a “sweet” crude oil, but then again, not quite as “sweet” than WTI.
  • Brent blend is quite excellent for making gasoline and middle distillates, both of which are utilized in large quantities in Northwest Europe, where Brend blend crude oil is most often refined.


  • OPEC Basket oil is a collective seven different crude oils from Algeria, Saudi Arabia, Indonesia, Nigeria, Dubai, Venezuela and the Mexican Isthmus.
  • Because OPEC Oil has a much higher percentage of sulfur within its natural make-up and therefore is not nearly as sweet as WTI or even Brent Blend and since it is also not naturally as “Light” as well, the prices of OPEC oil are normally consistently lower than either Brent Blend or WTI.
  • However, OPEC’s willingness or ability to quickly increase production when necessary makes OPEC a consistent “Major Player” in the oil industry.