Prices in the oil market have been concentrated around three main regional crude oil benchmarks, or `marker" crudes: West Texas Intermediate (WTI) from the
Crude oil is graded on the basis of its specific gravity (API) and the sulphur level. Higher API gravity degree oil values have a greater commercial value. The lower the level of sulphur, the sweeter and the more preferred the oil.
West Texas Intermediate (WTI) is the underlying commodity of the NYMEX oil futures contracts. It is of very high quality with an API gravity of 39.6 degrees (a `light" crude oil), and containing only about 0.24 per cent of sulphur (a `sweet" crude oil). It is ideal for refining products such as low-sulphur petrol and low-sulphur diesel.
Brent is a benchmark for oil from Europe, Africa and West Asia and is traded on the ICE exchange (
As a result of the gravity and sulphur differences, WTI is preferred by refiners and is processed into high-value products such as petrol, diesel, heating oil, and jet fuel. It typically trades at a $1-2/barrel premium to Brent. However, in recent times, it has been seen that WTI trades at a heavy discount (as high as $7 per barrel) to Brent. Logically, WTI is a higher grade crude and should trade at a higher price. So, what is the reason for this divergence from the norm?
One reason is that the
The Marseille port is the world"s third largest oil hub with 64.2 million tonnes moving through it annually. It was feared that the strike could lead to the shutdown of nearly half of
No sooner had the strike in Europe settled than concerns arose in the
Nigerian and Iranian oil grades are also priced according to a Brent-based formula. As the political situation gets tense, Brent shows a bigger increase in prices.
PIN/Thehindubusinessline.Com
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