Benchmark (crude oil)

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^[1]

Crude oil price Benchmarks were first introduced in the mid 1980's. There are three official benchmarks, WTI, Brent Blend, and Dubai.

Contents 1 West Texas Intermediate (WTI) 2 Brent Blend 3 Dubai 4 Contracts 5 References

[edit] West Texas Intermediate (WTI)

West Texas Intermediate is used primarily in the U.S. and is very light and very sweet. This makes 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 sourer than Brent. As a result of these gravity and sulfur differences, WTI typically trades at a dollar or two premium to Brent and another dollar or two premium to the OPEC basket. The OPEC basket typically trades in OPEC’s official price range. ^[2]

[edit] Brent Blend

Brent is used primarily in Europe and the OPEC market basket, used around the world.

[edit] Dubai

Dubai is also known as Fateh is used in the United Arab Emirates. ^[3]

[edit] Contracts

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

Crude oil is the world's most actively traded commodity, and the NYMEX Division light sweet crude oil futures contract is 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.

[edit] References

1. ^ Petroleum Equities Inc.;Oil & Gas Investing Tab. Retrieved on 2007-01-17.
2. ^ Oil Industry Commentary. Retrieved on 2006-07-05, Wiki user Beland.
3. ^ Crude Benchmark Analysis. Retrieved on 2006-10-08.