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Crude Oil Benchmark

  • October 20, 2020
  • Team Kalkine

The crude oil industry is highly volatile and sensitive to geopolitical conditions. We hear about crude oil price movements nearly every day and come across words like Brent or WTI more often and on other occasions, Bonny Light, or OPEC Reference Basket. The point to ponder is that many buyers and sellers trade crude oil across all geographies and how do they come to an agreement on prices.

The price of crude oil depends on its quality. Fossil fuels are essentially carbon atoms bonded with hydrogen atoms in different patterns. So, the big question arises, why they are priced differently then?

The answer lies in the journey of million years when tiny organisms were buried under high pressure and subjugated to a certain degree of temperature. The buried organisms gradually converted into fossil fuels. The temperature and pressure on the buried material, along with time, decide whether it will turn into natural gas or crude oil reservoirs or even coal.           


Image Source © Kalkine Group 2020

The amount of pressure exerted by the layers of overlying sediments on the remains and exposure to a specific degree of temperature over millions of  years plays a critical role in the nature and grade of crude oil. The remains of the organisms also contain traces of other elements which will be present in the crude oil. Most of the oil and gas deposits are found along with water that is also produced along with the hydrocarbons. These add to the quality of crude oil and affect the prices.

Factors determining the quality of crude oil

Sulphur Content

Based on the percentage of sulphur in crude oil, crude is either termed as “Sweet Crude” or “Sour Crude”. Sweet crude contains sulphur less than or equal to 0.5%. Crude oils with more than 0.5% of sulphur are termed as sour crude. Sulphur is a highly toxic and corrosive element, and it corrodes the equipment and pipelines through which it is passed. It is an undesirable component present in crude oil, and most of the refineries around the world try to avoid processing higher sulphur content crude oils.


The density of the crude oil is measured on an API scale. API is the abbreviation for the American Petroleum Institute. Higher the API density, lighter the crude will be. Water has an API gravity of 10.                 



S.G is the specific gravity of crude oil

Crude oil with lower sulphur content and higher API density is preferred. Denser crude oil contains heavier hydrocarbons making it costlier to pump to the surface and also lesser yields of gasoline during the refining process.

The density of the crude oil determines the yield of different products from the refineries. One barrel of crude oil is equivalent to 42 U.S gallons. A typical refinery tries to extract up to 20 gallons of gasoline, nine gallons of diesel, four gallons of jet aviation fuel and fractions of kerosene and petrochemical products from one barrel of crude oil.

The price of specific crude depends on the volume % of each distillate produced during the refining process along with the sulphur content.


Since there are thousands of oilfield and reservoirs around the world, each has its own characteristic and quality. Depending on the contents and characteristics of crude oil, it is compared with the globally accepted parameters of some of the high-grades of crude oil.

Some of the famous, established benchmarks are discussed here.


It is the most widely used, and nearly 75% of all the crude oil contracts use it as a reference for the trade. Brent is an oilfield in the North Sea and has a very low density and sweet. The high percentage of gasoline and diesel oil is extracted from the refining of the Brent crude.

Four fields in the North Sea produces Brent grade crude oil- Brent, Forties, Ekofisk and Oseberg. First two belongs to the United Kingdom while later two belongs to Norway.


West Texas Intermediate, or WTI, is used for the crude oil produced in North America and is priced to the crude oil trading hub of Cushing, Oklahoma.  It is light and sweet crude and is also used to benchmark the imported crude from Mexico and South America.


Dubai and Oman crude are medium in density and are sour used to benchmark the crude oil produced in the Middle East and exported to Asian Markets.

Bonny Light

Bonny light is referred to as the crude produced in Nigeria. It has an API gravity of 32.90 and is sweet crude. Many refiner purchase Bonny Light to mix with the heavier crude oil making, the entire solution lighter to feed the refinery.

OPEC Reference Basket (ORB)

It is based on the average of the 11 different crude oil grades from the participating members of the OPEC. The average API of the crude is 32.70 and sulphur content of 1.77%, making it sour crude.

Russian Export Blend

Russia is one of the major exporters of crude oil. The API gravity of benchmark is 320 and is sour.

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