4. Crude Oil
Light Medium Crude
Medium Heavy Crude
Different crude oils are graded by their density or specific gravity assigned by an API gravity as well as by their content of sulfur. Their quality is measured in terms of density; light to heavy, and sulfur content; sweet to sour. Density is classified by the American Petroleum Institute (API). API gravity is defined based on density at a temperature of 15.6 ºC. The higher is the API gravity, the lighter is the crude. Light crude generally has an API gravity of 38 degrees or more and heavy crude an API gravity of 22 degrees or less. Crude with an API gravity between 22 and 38 degrees is generally referred as medium crude.
The EU and IMO have a slightly different definition of ‘heavy'. Their cut-off between ‘heavy' and ‘intermediate' lies at 25.7 API gravity, meaning that more crude oil types fall under the ‘heavy' definition of EU and IMO. Sweet crude is commonly defined as oil with a sulfur content of less than 0.5%, while sour crude has a sulfur content of greater than 0.5%. API gravity and the sulfur content are significant factors in explaining the price level and trade pattern of a particular crude oil.
Brent Blend is used for pricing around two-thirds of the crude traded internationally. Rolling price assessments are based on physical Brent-Forties-Oseberg crude oil cargoes loading not less than 10 days ahead and loaded free on board at the named port of shipment (‘Brent Dated). Brent Blend is a light, sweet North Sea crude with an API gravity of approximately 38 and a sulfur content of approximately 0.4%.
Russian Export Blend, the Russian benchmark crude, is a mixture of several crude grades used domestically or sent for export. Russian Export Blend is a medium, sour crude oil with an API gravity of approximately 32 and a sulfur content of approximately 1.2%. Its spot price is reported at Augusta, Italy, and Rotterdam, the Netherlands, which act as the two primary delivery points.
West Texas Intermediate, the US benchmark crude oil, is a light, sweet crude oil with an API gravity of approximately 40 and a sulfur content of approximately 0.3%. The spot price of West Texas Intermediate is reported at Cushing, Oklahoma.
The quality of crude oil and other feedstock dictates the level of processing and conversion necessary to achieve what a refiner sees as an optimal mix of products.
Light, sweet crude is more expensive than heavier, sourer crude because it requires less processing and produces a slate of products with a greater percentage of value-added products, such as gasoline, diesel, and aviation fuel. Heavier, sourer crude typically sells at a discount to lighter, sweeter grades because it produces a greater percentage of lower value-added products with simple distillation and requires additional processing to produce lighter products.