3 Major Oil Benchmarkets. Table of Contents
3 major benchmark of oils in the world
Crude oil is one of the most important commodities in the world.
Unlike gold and silver, crude oil is a kind of one-time consumption of energy.
It is burned out and you have to buy it if you want to continue to use it.
Moreover, crude oil is still a fossil energy source, and there is a risk of mining out sooner or later.
In addition, because crude oil is consumed by humans for various purposes every day, the total amount is declining.
The international crude oil market pricing is based on the standard oil of the world’s major oil-producing areas.
Global crude oil is divided into many varieties according to region and quality.
Currently, there are three major benchmark crude oils in the international crude oil market.
They are West Texas Intermediate Base Crude (WTI), Brent Crude (Brent Crude), and Dubai/Oman (Dubai/Oman).
These three crude oils, as the benchmark varieties of international crude oil trade, have important reference significance for crude oil pricing.
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1. West Texas Intermediate (WTI)
West Texas Intermediate (English: West Texas Intermediate, referred to as WTI), produced in the western part of Texas in the United States, is a light, low-sulfur oil.
The crude oil is also the subject of the New York Mercantile Exchange (New York Mercantile Exchange) petroleum futures contract.
Crude oil spot transactions in North America mainly refer to WTI futures prices as a pricing benchmark and are linked with it.
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2. Brent Crude
Brent Crude (English: Brent Crude), produced in the North Sea oil field in the northeast of England, is a light, low-sulfur oil.
As the most widely used benchmark crude oil varietyStart Investing in Gold and Oil on FBS’s platforms in the global crude oil market, its composition mainly includes 4 varieties: Brent, Forties, Ekofisk and Oseberg.
This oil is listed and traded on the Intercontinental Exchange (ICE) as the subject of a futures contract.
Brent crude oil is an important pricing reference for crude oil varieties including Europe, the Mediterranean, Africa, Australia, and some countries in Asia.
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3. Dubai/Oman crude oil
Dubai/Oman crude oil (Dubai/Oman) is produced in the Arab region and is a medium-quality high-sulfur oil.
Dubai crude oil does not have a futures trading market and is traded through Platts’ spot window trading platform.
Although Oman crude oil is listed on the UAE Dubai Mercantile Exchange (DME), which is the subject of futures contracts, due to the characteristics of its contract design, Oman crude oil futures only have the form of futures trading.
In fact, it is the same spot transaction as Dubai crude oil and therefore flows The performance is far less than that of WTI and Brent crude oil futures.
At present, these two crude oil varieties are often used as the pricing benchmark for crude oil exported from the Middle East to the Asian market.
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What is Crude Oil?
Generally speaking, crude oil can also be called petroleum, also called “black gold”.
We are accustomed to calling crude oil extracted from oil wells that have not yet been processed.
Crude oil is a dark brown or dark green viscous liquid or semi-solid combustible substance composed of various hydrocarbons.
Crude oil is mainly used as a raw material for fuel, gasoline, or chemical products.
Due to differences in global geological structures, oil-generating conditions, and ages, the nature and composition of crude oil produced in each region are very different.
The nature of crude oil in the same area may vary greatly due to different oil production zones.
The composition of crude oil is very complicated and it is difficult to align and classify.
At present, internationally, it is mainly divided into three categories based on the proportion index: light crude oil, medium crude oil, and heavy crude oil.
Crude oil is usually measured in barrels and tons.
The crude oil measurement unit in Western countries such as OPEC and Europe and the United States is expressed in barrels, while the ton (t) is commonly used as the crude oil measurement unit in countries such as China and Russia.
The conversion relationship between tons and barrels is 1 ton (crude oil)≈7.35 barrels (crude oil).
However, because ton is a unit of mass and barrel is a unit of volume, and the density of crude oil has a relatively large range (0.75~1), there will be different results in crude oil trading if it is calculated in different units.
Gallon and liter are two relatively small units of measurement of refined oil.
Gas stations in Western countries such as Europe and the United States usually use gallons as a unit, while gas stations in China are priced in liters.
The conversion relationship between liter and a gallon is 1 liter≈0.264 gallons (US).
1 gallon (US) ≈ 3.7854 liters.
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What is West Texas Intermediate crude oil?
West Texas Intermediate crude oil, the English full name is West Texas Intermediate, abbreviated as WTI.
It is produced in many states in the United States, including Texas (State of Texas), North Dakota (State of North Dakota), Louisiana (State of Louisiana), etc.
Most of the crude oil is refined and transported to Cushing, Oklahoma (Cushing, Oklahoma), which is also the delivery location for crude oil contracts.
The Cushing area of the United States is located in the central United States and is a small town in Oklahoma.
Although Cushing no longer produces oil, its oil storage tanks and pipelines have been retained, and it has become the most important crude oil trade distribution center and pipeline transportation hub in the United States.
In recent years, as more and more pipelines have been built, Cushing’s oil reserves have decreased, but they are still an important part of the total inventory of the United States.
WTI crude oil is a kind of light, low-sulfur oil.
Lightweight refers to crude oil with low viscosity and sulfur content, which is very suitable for refining into gasoline, diesel and aircraft fuel, etc., and can increase the output value of oil refineries, and is crude oil with a high utilization rate.
WTI crude oil has good liquidity, high quotation transparency, and the United States has a very large influence in global politics and economy, so WTI crude oil has become one of the world’s three major benchmark oils.
It not only has a high utilization rate but also has a high investment value.
As one of the most important investment products in the international crude oil market, WTI crude oil has always been in the leading position in global trading volume.
We often see how much oil prices have skyrocketed or plummeted in some media, mainly referring to the price of WTI crude oil.
The international crude oil market pricing is based on the standard oil of the world’s major oil-producing areas.
WTI crude oil is the subject of the New York Mercantile Exchange (New York Mercantile Exchange) petroleum futures contract.
All crude oil spot transactions in the United States and North America mainly refer to WTI futures prices as a pricing benchmark and are linked with it.
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What is Brent Crude Oil?
Brent crude oil, called Brent Crude in English, is produced in the Brent and Ninian oil fields in the North Sea.
It is mainly processed and refined in Northern Europe. It is a light, low-sulfur oil.
Mainly suitable for refining gasoline, diesel and jet fuel.
Brent crude oil is named after the Brent oil field in Scotland.
As the most widely used benchmark crude oil variety in the global crude oil market, its composition mainly includes 4 varieties: Brent, Forties, Ekofisk and Oseberg ).
Among them, Brent and Forties are located off the coast of England, and Ekofisk and Oseberg are located off the coast of Norway.
After entering the 1980s, Brent crude oil production gradually decreased, and then gradually joined new members such as Fortis and Ecofisk.
Internationally, these four types of crude oil are also called “BFOE” (named after the initials of the four types of crude oil).
Most of the extraction of Brent crude oil is carried out at sea, so the extraction cost is high and the difficulty is relatively greater.
Brent crude oil is listed and traded on the Intercontinental Exchange (ICE) as the subject of futures contracts.
The impact of crude oil prices mainly depends on changes in OPEC production and changes in demand in Europe and Asia.
The sulfur content of Brent crude oil (about 0.38%) is slightly higher than that of WTI crude oil (about 0.24%), so its quality is relatively low.
As the most widely used crude oil variety in the global market, Brent crude oil has become a reference for the pricing of most crude oils exported to the West including Europe, the Mediterranean, the Middle East and Africa, and is linked to OPEC’s self-made oil price index.
Crude oil producers in Russia, the Middle East and other parts of Asia also use it as a reference indicator.
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What is Dubai/Oman Crude Oil?
Dubai/Oman crude oil (Dubai/Oman) is produced in Arab regions such as Dubai and Oman and is a medium-quality high-sulfur oil.
It is mainly used as a benchmark for the pricing of crude oil exported from the Middle East to Asian markets.
It is the crude oil with relatively small influence among the three major benchmark crude oils in the world.
Saudi Aramco, the national oil company of Sala Arabia, also uses Dubai/Oman oil as a benchmark for pricing when selling oil to Asia.
1. Dubai crude
Dubai crude oil produced in the Middle East, Dubai, belongs to crude oil.
Dubai crude oil does not have futures trading but is traded through the spot window platform launched by Platts.
Due to the small amount of Dubai crude oil itself, the output is also decreasing year by year.
In order to ensure the liquidity of spot transactions, Platts continues to improve the window mechanism according to market changes, so that Dubai benchmark crude oil can still become one of the crude oil price customizers.
2. Oman crude
Oman Oman crude oil produced in the Middle East region also belongs to the crude oil.
Compared with Dubai crude oil, its reserves are more and its output is relatively stable.
Although Oman crude oil is listed on the Dubai Mercantile Exchange (DME) of the United Arab Emirates as the subject of futures contracts, due to the characteristics of its contract design, Oman crude oil futures only have the form of futures trading, which is actually the same spot transaction as Dubai crude oil.
As Oman implements an independent oil policy, as an important oil producer and exporter in the Middle East, Qatar was the only non-OPEC member country in the region before it withdrew from the Organization of Petroleum Exporting Countries (OPEC) in 2019 and did not join OPEC.
Compared with Dubai crude oil, Oman crude oil has the advantages of large reserves, high output and stability, which make it play an increasingly important role in the crude oil market.
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What is The Organization of Petroleum Exporting Countries (OPEC)?
The Organization of Petroleum Exporting Countries abbreviated as “OPEC “, the full English name (Organization of Petroleum Exporting Countries), is the five countries of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela to jointly deal with the seven sister multinational oil companies led by the United Kingdom and the United States, and An intergovernmental international organization was established in Baghdad in 1960 to maintain the stable income of oil.
Nigerian Barkindu was re-elected as OPEC Secretary-General in 2019 for a three-year term.
OPEC currently has 13 member states including Iran, Iraq and Kuwait.
Non-OPEC is a country or region that does not belong to the OPEC Organization of Oil-Producing Countries, mainly including Russia, the United States, and China.
According to regulations, anyone who wants to become a member of OPEC must meet the following conditions can apply to join OPEC: (1) Must be a net exporter of crude oil, and a country whose crude oil production exceeds its own consumption; (2) Must pass Three-quarters of the official member states of the organization (including the 5 founding member states) unanimously agreed to accept it.
OPEC currently has 13 member states: 5 in the Middle East (Asia), 7 in Africa, and 1 in South America.
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