Crude oil benchmarks
, also known as oil markers
, were first introduced in the mid 1980s. There are three primary benchmarks, WTI, Brent Blend, and Dubai. Other well known blends include the Opec basket used by OPEC
, Tapis Crude
which is traded in Singapore, Bonny Light
used in Nigeria and Mexico's Isthmus
. The Energy Intelligence Group
has published a handbook which identifies 161 different blends in total.
Benchmarks are used because there are many different varieties and grades
of crude oil
. 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 transportation cost. For example if the US is the net consumer of Brent, WTI will be more expensive than Brent because it has to have the same price, if shipping is included.
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, WTI typically trades at a dollar or two premium to Brent and another dollar or two premium to the OPEC basket.
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