Did you know there are other types of crude oil other than the light sweet kind that you see trading on the floor of the NYMEX.
There are 3 different types of Crude Oil that the petroleum industry geographically categorizes it by, Light sweet (WTI); North Sea Brent; and Oman (sour). The WTI (West Texas Intermediate) is a very high-quality, sweet, light oil delivered at Cushing, Oklahoma for North American oil. This is the most common type of Crude Oil and the one that is traded in the oil futures pit at the NYMEX. Then there is Brent Crude which is sourced from the North Sea. Brent blend is a light crude oil, though not as light as WTI, and is ideal for production of gasoline and middle distillates. Dubai-Oman Crude is a light sour crude oil extracted from Dubai. Dubai Crude is used as a price benchmark or oil marker because it is one of only a few Persian Gulf crudes available immediately.
Crude oil may be considered light if it has low density or heavy if it has high density, and it may be referred to as sweet if it contains relatively little sulfur or sour if it contains substantial amounts of sulfur.
The location is important because it effects transportation costs to the refinery. Light crude oil is more desirable than heavy oil since it produces a higher yield of gasoline, while sweet oil commands a higher price than sour oil because it has fewer environmental problems and requires less refining to meet sulfur standards imposed on fuels in consuming countries.
Trading these different crude futures markets is relatively simple as all of the same fundamental and economic factors contributing to their prices. You can trade Light Sweet crude futures on the floor of the NYMEX or on the electronic screen offered by CME. Sour crude futures can be traded on the electronic screen on CME as well. Brent crude futures are most liquid on the ICE (Intercontinental Exchange) electronic platform.
Trading in futures and options involves a substantial degree of a risk of loss and is not suitable for all investors. Past performance is not indicative of future results.
