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A benchmark crude  or marker crude is a crude oil that serves as a reference price for buyers and sellers of crude oil. Energy Intelligence Group publishes a handbook which identified major crude streams or blends in its edition. Benchmarks are used because there are many different varieties and grades of crude oil.
This is the price that controls world oil market price. West Texas Intermediate is used primarily in the U. It is light API gravity and sweet low-sulfur thus making it ideal for producing products like low-sulfur gasoline and low-sulfur diesel. Brent is not as light or as sweet as WTI but it is still a high-grade crude. As a result of these gravity and sulfur differences, before WTI typically traded at a dollar or two premium to Brent and another dollar or two premium to the OPEC basket.
Brent Crude is a mix of crude oil from 15 different oil fields in the North Sea. It is the benchmark used primarily in Europe though it is also mixed in with the OPEC reference basket which is used around the world. Dubai Crude , also known as Fateh, is a heavy sour crude oil extracted from Dubai. For many years it was the only freely traded oil in the Middle East, but gradually a spot market has developed in Omani crude as well. For many years, most of the oil producers in the Middle East have taken the monthly spot price average of Dubai and Oman as the benchmark for sales to the Far East WTI and Brent futures prices are used for exports to the Atlantic Basin.
In July , a potential new mechanism arose in the form of the Dubai Mercantile Exchange , which offers futures contracts in Omani crude. Whether the DME will be successful, and whether Omani futures prices will be adopted by producers and buyers as a benchmark, remain to be seen. Because of its excellent liquidity and price transparency, the contract is used as a principal international pricing benchmark.
The first futures contracts on crude oil were traded in , with the Chicago Board of Trade CBOT and the New York Mercantile Exchange Nymex both attempting to take advantage of the government's de-regulation of crude oil. CBOT's initial contracts had delivery problems, so customers abandoned it for Nymex. Crude oil became the world's most actively traded commodity , and the NYMEX Division light sweet crude oil futures contract becoming the world's most liquid form for crude oil trading, as well as the world's largest-volume futures contract trading on a physical commodity.
Additional risk management and trading opportunities are offered through options on the futures contract; calendar spread options; crack spread options on the pricing differential of heating oil futures and crude oil futures and gasoline futures and crude oil futures; and average price options. The contract trades in units of 1, barrels, and the delivery point is Cushing, Oklahoma , which is also accessible to the international spot markets via pipelines.
The contract provides for delivery of several grades of domestic and internationally traded foreign crudes, and serves the diverse needs of the physical market. From Wikipedia, the free encyclopedia. Archived from the original on Acronyms Oil shale gas Peak oil mitigation timing People Petrocurrency Petrodollar recycling Shale band Shale gas Swing producer Unconventional oil heavy crude oil sands oil shale.