Crude Oil

Crude Oil Meaning:
In commodity market terminology, Crude Oil or Petroleum is a flammable liquid which occurs in nature and is composed of a complex mixture of hydrocarbons and other naturally occurring organic compounds. Crude oil is found underground and its composition varies depending on where it is drilled. Crude oil is either “light” or “heavy.” Light oil is more desirable because it produces more gasoline. Crude can also be either “sweet” or “sour,” sweet being more desirable because it requires less refining to meet sulfuric standards of consuming countries.

The principle benchmarks (standards) for crude oil are:
- West Texas Intermediate – a high quality sweet, light oil.
- Brent Blend – made up of oil from 15 oil fields in the North Sea.
- Dubai- Oman, a benchmark for Middle Eastern sour crude.
- OPEC Reference Basket – a weighted average of different oil blends from several Organization of Oil Producing Countries (OPEC).

Crude Oil Example:
Crude Oil futures trade primarily on the New York Mercantile Exchange and are the most heavily traded commodity on that exchange. The futures are for West Texas Intermediate Crude and trade for 30 consecutive months in units of 1,000 U.S. barrels (42,000 gallons). Quotes are in U.S. Dollars and cents with a minimum fluctuation of $0.01 per barrel or $10.00 a contract. The last trading day is on the third business day prior to the 25th calendar day of the month preceding the delivery month.