There is a misconception that oil is a single substance that possesses nothing to differentiate it from other oils. This is not entirely true; in fact there are numerous types of oil.
Crude oil, he discovered in its natural and unrefined state, can range in density, consistency, weight, and thickness. There is also an immense gradation in its color once extracted from the ground. This color can also range from a light golden yellow all the way to the darkest color of black.
Due to the vigorous nature of supply and demand, the value of oil’s most common benchmarks are constantly shifting.
As mentioned earlier, oil has numerous benchmarks, each one representing the oil from a particular part of the world. The prices of these oils are dependent with one of the three primary benchmarks listed below:
- Brent Blend – This account for roughly two-thirds of all crude oil contracts around the world and is the most used oil marker. The word “Brent” refers to oil that comes from four different fields in the North Sea namely; Brent, Ekofisk, Forties, and Oseberg. Oil that originates from this region is light and sweet, thus making it the ideal type of oil to be refined into diesel fuel, gasoline, and other products that are in high demand.
- West Texas Intermediate (WTI) – This refers to oil that is extracted from the well located across the United States and is the country’s main oil benchmark. The extracted substance is then transported via pipeline to Cushing, Oklahoma. Similar to Brent, WTI is also light and sweet. A drawback however with this benchmark is that its supplies are land-locked exclusively to the West Texas Crude, making it relatively expensive if it were to be shipped to other parts of the globe.
- Dubai or Oman – The last benchmark, this crude originates from the Middle East and is a useful reference for oil that is of a grade slightly lower than Brent or WTI. This benchmark has crude that comes from Abu Dhabi, Dubai, and Oman.
The Oil market is diverse and the quality and location of the oil have an impact on the oil price. Since these benchmarks are quite stable, most crude oil prices around the world are determined by them.