Science and Tech

How pricing of Crude oil done ?

• Crude oil is priced using a market-based formula in which the price of a certain variety of crude oil is set as a differential to a certain marker or reference price.

• Market referencing pricing of spot crude markets is based on spot such as West Texas Intermediate (WTI), Dated Brent and Dubai.

• The price of a barrel of oil is dependent on both its grade—determined by factors such as its specific gravity and its sulphur content—and location.

• WTI is a light sweet crude oil used as a benchmark in oil pricing and its properties and production sites makes it deal for being refined in the United States. 
• Brent is also a sweet light crude oil, though not as light and sweet as WTI, and is sourced from the North Sea. 

• Dubai crude has the highest sulphur content among the three and is considered to be heaviest.

• Sweet and sour refers to the level of sulphur, an undesirable impurity. Sweet crude contains less sulphur and sour contains more.