What are Benchmarks in Crude Oils?

The crude oil prices about which we generally read in newspapers are the spot price per barrel or per 159 litres. The rate at which Crude oil is sold in market is highly dependent on its grade, its specific gravity, its sulphur content, and its location of production as well as delivery (for logistics reasons).

Specific gravity in oil

Regarding Specific gravy in oil, there is an API gravity or American Petroleum Institute gravity which measures how heavy or light petroleum liquid is compared to water. If the API gravity is greater than 10, Crude oil is lighter and floats on water; if less than 10, it is heavier and sinks.

On the basis of several parameters, there can be several types of crude oils. Due to this, there are certain benchmark crude oils used for pricing of the oil. This means that a benchmark crude oil serves as a reference point for the many other crude available. The important benchmark crude oils are Argus Sour Crude (ASC), Bonny Light , Brent, Dubai , Indonesian, Isthmus-34  Light , Japan Cocktail , OPEC Reference Basket , Tapis , Urals and West Texas Intermediate (WTI). Out of them, the three primary benchmarks are WTI, Brent Blend and Dubai.

The OPEC basket is used by OPEC, Tapis Crude is traded in Singapore, Bonny Light is used in Nigeria and Isthmus-24 light is used in Mexico.