Benchmark (crude oil)

A benchmark crude or marker crude is a crude oil that serves as a reference price for buyers and sellers of crude oil. There are
three primary benchmarks, West Texas Intermediate (WTI), Brent Blend, and Dubai Crude. Other well-known blends include the
OPEC Reference Basket used by OPEC, Tapis Crude which is traded in Singapore, Bonny Light used in Nigeria, Urals oil used in
Russia and Mexico's Isthmus. Energy Intelligence Group publishes a handbook which identified 195 major crude streams or blends in
its 2011 edition.[1][2]

Benchmarks are used because there are many different varieties and grades of crude oil.[3] Using benchmarks makes referencing
types of oil easier for sellers and buyers.

There is always a spread between WTI, Brent and other blends due to the relative volatility (high API gravity is more valuable),
sweetness/sourness (low sulfur is more valuable) and transportation cost. This is the price that controls world oil market price.

Contents
West Texas Intermediate (WTI)
Brent Blend
Dubai and Oman
Canadian Crude
Contracts
See also
Citations
References

West Texas Intermediate (WTI)

West Texas Intermediate is used primarily in the U.S. It is light (API gravity) and sweet (low-sulfur) thus making it ideal for
producing products like low-sulfur gasoline and low-sulfur diesel. Brent is not as light or as sweet as WTI but it is still a high-grade
crude. The OPEC basket is slightly heavier and more sour than Brent. As a result of these gravity and sulfur differences, before 2011
[4]
WTI typically traded at a dollar or two premium to Brent and another dollar or two premium to the OPEC basket.

Since 2011, WTI has traded at a lower prices thanBrent.

Brent Blend
Brent Crude is a mix of crude oil from 15 different oil fields in the North Sea. It is the benchmark used primarily in Europe though it
[2]
is also mixed in with the OPEC reference basket which is used around the world.

Dubai and Oman

Dubai Crude, also known as Fateh, is a heavy sour crude oil extracted from Dubai. It is produced in the Emirate of Dubai, part of the
United Arab Emirates.[5] Dubai's only refinery, at Jebel Ali, takes condensates as feedstocks, and therefore all of Dubai's crude
production is exported. For many years it was the only freely traded oil in the Middle East, but gradually a spot market has developed
in Omani crude as well.
For many years, most of the oil producers in the Middle East have taken the monthly spot price average of Dubai and Oman as the
benchmark for sales to the Far East (WTI and Brent futures prices are used for exports to the Atlantic Basin). In July 2007, a potential
new mechanism arose in the form of the Dubai Mercantile Exchange, which offers futures contracts in Omani crude. Whether the
DME will be successful, and whether Omani futures prices will be adopted by producers and buyers as a benchmark, remain to be
seen.

Canadian Crude
Edmonton Par and Western Canadian Select (WCS) "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°."[6]

The Canadian Crude Index (CCI) serves as a benchmark for oil produced in Canada.[7] It allows investors to track the price, risk and
volatility of the Canadian commodity.[7]The CCI provides a fixed price reference for Canadian crude oil and provides an accessible
and transparent index to serve as a benchmark to build investable products upon, and could ultimately increase its demand to global
markets.

Contracts
Because of its excellent liquidity and price transparency
, the contract is used as a principal international pricing benchmark.

The first futures contracts on crude oil were traded in 1983, with the Chicago Board of Trade (CBOT) and the New York Mercantile
Exchange (Nymex) both attempting to take advantage of the government's de-regulation of crude oil. CBOT's initial contracts had
[8]
delivery problems, so customers abandoned it for Nymex.

Crude oil became the world's most actively traded commodity, and the NYMEX Division light sweet crude oil futures contract
becoming the world's most liquid form for crude oil trading, as well as the world's largest-volume futures contract trading on a
physical commodity. Additional risk management and trading opportunities are offered through options on the futures contract;
calendar spread options; crack spread options on the pricing differential of heating oil futures and crude oil futures and gasoline
futures and crude oil futures; and average price options.

The contract trades in units of 1,000 barrels, and the delivery point is Cushing, Oklahoma, which is also accessible to the
international spot markets via pipelines. The contract provides for delivery of several grades of domestic and internationally traded
foreign crudes, and serves the diverse needs of the physical market.

See also
Argus Sour Crude Index(ASCI)
Gasoline usage and pricing
Petroleum industry
Price of oil

Citations
1. International Crude Oil Market Handbook, 2011
2. "Pricing Differences Among Various Types of Crude Oil" (https://web.archive.org/web/20101113164128/http://tonto.ei
a.doe.gov/ask/crude_types1.html). Archived from the original (http://tonto.eia.doe.gov/ask/crude_types1.html)on
2010-11-13. Retrieved 2008-02-17.
3. "Oil markets explained"(http://news.bbc.co.uk/1/hi/business/904748.stm)
. BBC News. 2007-10-18. Retrieved
2008-02-17.
4. "Oil Industry Commentary"(http://www.energypulse.net/centers/article/article_print.cfm?a_id=886). Retrieved
2006-07-05.
 5. "Crude Benchmark Analysis"(https://web.archive.org/web/20060322115911/https://www .platts.com/Oil/Resources/N
ews%20Features/crudeanalysis/index.xml). Archived from the original (http://platts.com/Oil/Resources/News%20Fea
tures/crudeanalysis/index.xml)on 2006-03-22. Retrieved 2006-10-08.
6. NRC 2013, p. 9.
7. [1] (http://boereport.com/2016/01/04/auspice-capital-advisors-launches-first-live-index-tied-to-canadian-crude-
oil/)|http://boereport.com/2016/01/04/auspice-capital-advisors-launches-first-live-index-tied-to-canadian-crude-oil/
8. The Asylum (https://books.google.com/books?id=D2y7SftShx8C)
, Leah McGrath Goodman, 2011, HarperCollins,
p90-91

References
Natural Resources Canada NRC (May 2011),Canadian Crude Oil, Natural Gas and Petroleum Products: Review of
2009 & Outlook to 2030(PDF), Ottawa, ON: Government of Canada, p. 9,ISBN 978-1-100-16436-6, archived from
the original (PDF) on October 3, 2013

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