Crude oil, and its various types, is the most traded commodity in the world, greatly affecting the global economy and setting the international cost of oil, which in turn contributes to the setting of fuel oil, petrol and diesel prices. Where do we obtain this crucial resource, and why is it so valuable? Find out here…
Crude oil is a raw material commodity; a liquid found deep within the Earth which comprises hydrocarbons, other organic matter and small amounts of metal. The hydrocarbons levels found in crude oil depend largely on what type of crude oil it is, the location from which it is extracted, and how it is extracted.
Crude oil is formed over millennia. Most of the oil we extract today comes from the remains of prehistoric algae and zooplankton which died in lakes and oceans, to the bottom of which their matter settled and combined with mud and sand. Over many, many years, this combination of materials was heated and pressured by heavy layers of sediment forming firstly the chemical, waxy component known as kerogen. During the heating process, this substance becomes liquid in a process known as catagenesis – and thus, we have crude oil!
Crude oil is an extremely valuable commodity. It is used in the creation process of many industrial and consumer goods used on a daily basis, such as plastics, metals, and from computers to shampoos! Most of the crude oil we extract goes into consumer products – an estimate of less than half a 42-gallon (159 litre) drum of oil is actually used in fuels production; the rest is used for consumer goods. Crude oil is thus an imperative resource, one we cannot live without – imagine a world without electricity, cars, food, even the ability to cook! All of this is made possible through crude oil.
Most people are unaware that there is more than one type of crude oil. Crude oil has four variants – heavy and light, and sweet and sour. Heavy crude oil refers to oil with a high density, while light oils are not as dense, and sweet and sour refer to the oil’s sulphur content. Sweet crude oil has a low sulphur content (less than 0.5%), making it more sought after as sweeter, lighter oil is more easily refined than its counterparts. The sweeter and lighter the crude oil, the higher the price it sells at, as well.
Brent crude oil is currently the most sought-after oil in the world. It is a light sweet crude, meaning it has low density and a low sulphur content. Being so popular, it is also a benchmark fuel – this means that it is used as a pricing reference for other oils, namely two-thirds of the world’s internationally traded crude oil. For instance, if the cost of a barrel of Brent crude oil is currently $50 per barrel, other oils will be sold for roughly the same price because that is the ‘going rate’ for oil at the time. Brent crude oil is extracted from the North Sea and comprises several blends of oil: Brent, Forties, Oseberg and Ekofisk.
West Texas Intermediate, also know as WTI or Texas light sweet, is a crude oil extracted from Texas, USA. Like Brent crude oil, this oil is also very much in demand and is a benchmark used in the New York Mercantile Exchange, which depicts future contracts – a term given to predetermined prices of oil in the future. WTI is actually lighter and sweeter than Brent crude oil but is less popular due to the larger supply of its North Atlantic counterpart.
Dubai’s crude oil is the most sought after medium sour oil in the world. Despite it having a higher density than Brent and WTI crude oils, as well as a higher sulphur content, it is in demand due to it being one of the few Persian Gulf crude oils immediately available. This also makes it another benchmark crude oil, specifically for oil pricing of Persian Gulf and for oil exports to Asia.
Named after the region around the city of Bonny in Nigeria, this crude oil is a high grade, light sweet variant. This crude oil is also renown for its low corrosivity for refineries, meaning petroleum and other such products are more easily refined from this crude oil than its counterparts.
Urals crude oil, extracted in Russia, is a mix of heavy sour and high-grade oil with the light sweet oil found in Western Siberia. The resulting oil is a medium sour crude oil blend usually sold at a cheaper price than more sought-after oils such as Brent crude oil. This oil is used as a benchmark in Eastern and Central Europe, as well as in the Mediterranean.
More than half of the crude oil extracted in Canada comes from oil sands. They have the world’s third-largest crude oil reserves, after Venezuela and Saudi Arabia, with 98% of this comprising oil sand reserves in the provinces of Alberta and Saskatchewan. Western Canadian Select is a blend of heavy crude oil, bitumen and sweet synthetic and condensate diluents. The Canadian Crude Oil Index (CCI) provides the benchmark for oil produced in Canada.
The OPEC (the Organisation of the Petroleum Exporting Countries) Reference Basket, or OPEC ORB, provides weighted averages of prices for petroleum blends produced by OPEC member countries forming part of the organization. It is also used as a major benchmark for crude oil prices, relevant to crudes like Girassol from Angola, Rabi Light from Gabon, Bonny Light from Nigeria, and Merey from Venezuela. It comprises 14 nations and its headquarters are in Vienna, Austria.
The type of crude oil extracted has a large impact on the end, refined product, as a refinery can make different classes of products depending on the oil they refine. For instance, certain refiners can only refine crude oil at or below certain densities and sulphur levels, as well as certain blends. Heavy sour crude oil often poses risks to refiners due to damage from the sulphur. Apart from this, roughly the same products are refined and made from crude oil, including:
Southern Africa gets most of its crude oil from Saudi Arabia, Nigeria and sometimes Angola, resulting in a mix of light sweet and medium sour crudes being imported into the area. Without this oil, industry would suffer as many countries in Southern Africa have no oil reserves of their own. For more information on this irreplaceable resource, contact the industry experts…