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Crude oil is often referred to as if it is just one homogeneous product. However, crude oil can take on many different qualities depending on the area from which it is produced. The differences in crude oil characteristics can affect its ultimate pricing and end market.
There exist “heavier” crudes and “lighter” crudes. A heavy crude is referred to as such because it contains larger hydrocarbon molecules which have more atoms than light crudes, which results in it being more dense. Generally speaking, lighter crude has received higher prices. This is because light crudes can be processed with less sophisticated refineries, requires less energy in the refining process, and more readily can produce products such as gasoline and diesel. However, the dynamic between light and heavy crude pricing has changed somewhat in the U.S. landscape, which will be discussed further below.
The most common measure of density for crude oil is API gravity. The scale ranges from 0-100° with lower figures representing higher density and vice versa.
|Crude Oil Classification||API Gravity|
|Condensate / Extra- Light||>50°|
|Intermediate / Medium||30-39°|
For reference, the density of water is 10° on the API scale. Crude is generally less dense than water (that is, it will float on top of water). However, there exists certain crude products which are extra heavy and more dense than water, such as bitumen, which is used for paving roads and is produced from areas such as Canada’s oil sands. Crudes with 30-39° API have historically been produced in the greatest volume and most refineries are configured to handle crude with this range of density.
The U.S. benchmark traded on the NYMEX is West Texas Intermediate (WTI) crude oil. WTI crude has a density of 39.6° API. It’s named as such because it is an “intermediate,” or medium density, crude. The international benchmark, Brent crude, which is traded on the ICE, is an intermediate crude with a 38.3° API.
Note that heavier crude has properties that make it more viscous. Viscosity describes how easily liquids can flow, with higher viscosity liquids flowing more slowly (such as molasses). Viscosity also changes with temperature as higher temperatures lessen viscosity. Heavy, viscous crude is often blended with lighter, less viscous crude or other low viscosity liquids for pipeline transportation. One example of highly viscous crude is that of the bitumen and heavy oils produced in Canada’s oil sands. Natural gasoline or condensate (both superlight hydrocarbons) are added to the bitumen to produce “dilbit” so that the end hydrocarbon product can be transported by pipeline. When natural gasoline and condensate are used in this context they are referred to as “diluent.”
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