In the context of global oil prices, "Brent crude oil" is frequently referred to in the news. What does this term imply?

1. It is a major classification of crude oil.

2. It is sourced from the North Sea.

3. It does not contain sulfur.

Which of the statements given above is/are correct?

The correct answer is 1 and 2 only.

Key Points

• Crude Oil pricing:
  • The price of oil, or the oil price, generally refers to the spot price of a barrel of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent crude, Dubai Crude, OPEC Reference Basket, Tapis Crude, Bonny Light, Urals oil, Isthmus and Western Canadian Select (WCS).​ Hence, statement 1 is correct.
• Factors Affecting the Crude Oil Pricing:
  • There is a difference in the price of a barrel of oil based on its grade. Discussed below are the factors which are responsible for the increase or decrease in the crude oil pricing in India:
    1. Its specific gravity or API​
    2. Its sulphur content
    3. Its location—for example, its proximity to tidewater and/or refineries. Heavier, sour crude oils lacking in tidewater access—such as Western Canadian Select— are less expensive than lighter, sweeter oil—such as WTI.
• Types of Crude Oil:
  • ​​There are over 100 crude oils that are traded internationally. However, there are two which are the most common:
    1. Brent Crude:
       • It is a combination of crude oil from 15 different oil fields in the Brent and the North Sea areas. Hence, statement 2 is correct.
       • Comprises 0.37 per cent of sulphur. Hence, statement 3 is incorrect.
       • It is ideal for making Motor Spirit (Petrol) and middle distillates.
    2. West Texas Intermediate (WTI):
       • ​It is a high-quality crude and is excellent for refining for maximizing Petrol.
       • The presence of 0.24 per cent of sulphur, makes it a sweet crude.

Additional Information

• Difference between Brent and WTI:
  • ​Brent crude oil originates from oil fields in the North Sea between the Shetland Islands and Norway, while West Texas Intermediate (WTI) is sourced from US oil fields, primarily in Texas, Louisiana, and North Dakota.
  • WTI with a lower sulphur content (0.24%) than Brent (0.37%), is considered "sweeter".
  • Brent crude price is the international benchmark price used by OPEC while WTI crude price is a benchmark for US oil prices.
  • Both oils are relatively light, but Brent has a slightly higher API gravity, making WTI the lighter of the two.

Important Points

• Since India imports primarily from OPEC countries, Brent is the benchmark for oil prices in India.