CRUDE OIL CLASSIFICATION AND BENCHMARKS
131
decline in the early 1990s, but most of the oil exported from Russia
is also relatively heavy and sour in quality.
In fact, the Russian benchmark crude, known as Russian Export
Blend, is a mixture of several crude grades used domestically or
sent for export. The Export Blend is a medium, sour crude oil with
an API gravity of approximately 32 and a sulfur content of approximately 1.2% by weight.
While supply has typically become poorer in quality (Swain,
1991, 1993, 1998, 2000), with more heavy and high-sulfur crude
oil in the mix, the demand for products has veered the other way;
demand for light products has grown most rapidly. On the other
hand, the demand for residual fuels from utilities has declined
mainly because of substitution by gas. Meanwhile, the quality
requirements for light products have become ever stricter. Sulfur
levels in transportation fuels have tightened relentlessly — a
trend that has accelerated since 2000 when leaded fuel was outlawed within the nations of the European Union. Furthermore,
the sulfur content of gasoline and diesel are now below 50 ppm
in Europe and the United States. Similar rules are being applied
in many of the industrialized Asian countries and much of the
developing world is heading in the same direction, although at a
much slower rate.
This disparity between crude oil and product quality will continue to widen, although most petroleum economists concur that
production from the North Sea and within the United States is on
the decline relative to demand in the coming years considering
that both Europe and North America more dependent on imported
oil. These imports are likely to be increasingly supplied from the
regions with the biggest reserves, such as the nations concentrated
in the Persian Gulf, and are mainly sour in quality. Other countries
with large reserves, such as Venezuela and Russia, also typically
produce heavier sourer crudes.
As the world becomes critically more reliant on heavier and
higher sulfur streams, it is the sour crude that is gradually assuming more importance in the price discovery process. Another problem is the declining production of benchmark crude oils. Thus,
Urals crude in Europe and Mars crude oil blend in the United
States have emerged as alternative benchmarks to their sweet
counterparts Brent and West Texas Intermediate crude oil. This
change in emphasis has been encouraged by the extreme volatility
seen in recent months between light sweet and heavy sour crude
131
decline in the early 1990s, but most of the oil exported from Russia
is also relatively heavy and sour in quality.
In fact, the Russian benchmark crude, known as Russian Export
Blend, is a mixture of several crude grades used domestically or
sent for export. The Export Blend is a medium, sour crude oil with
an API gravity of approximately 32 and a sulfur content of approximately 1.2% by weight.
While supply has typically become poorer in quality (Swain,
1991, 1993, 1998, 2000), with more heavy and high-sulfur crude
oil in the mix, the demand for products has veered the other way;
demand for light products has grown most rapidly. On the other
hand, the demand for residual fuels from utilities has declined
mainly because of substitution by gas. Meanwhile, the quality
requirements for light products have become ever stricter. Sulfur
levels in transportation fuels have tightened relentlessly — a
trend that has accelerated since 2000 when leaded fuel was outlawed within the nations of the European Union. Furthermore,
the sulfur content of gasoline and diesel are now below 50 ppm
in Europe and the United States. Similar rules are being applied
in many of the industrialized Asian countries and much of the
developing world is heading in the same direction, although at a
much slower rate.
This disparity between crude oil and product quality will continue to widen, although most petroleum economists concur that
production from the North Sea and within the United States is on
the decline relative to demand in the coming years considering
that both Europe and North America more dependent on imported
oil. These imports are likely to be increasingly supplied from the
regions with the biggest reserves, such as the nations concentrated
in the Persian Gulf, and are mainly sour in quality. Other countries
with large reserves, such as Venezuela and Russia, also typically
produce heavier sourer crudes.
As the world becomes critically more reliant on heavier and
higher sulfur streams, it is the sour crude that is gradually assuming more importance in the price discovery process. Another problem is the declining production of benchmark crude oils. Thus,
Urals crude in Europe and Mars crude oil blend in the United
States have emerged as alternative benchmarks to their sweet
counterparts Brent and West Texas Intermediate crude oil. This
change in emphasis has been encouraged by the extreme volatility
seen in recent months between light sweet and heavy sour crude