Indian Crude Basket

The Indian Basket of Crude oil

  • The Indian Basket of Crude oil is based on the weighted average of Middle East sour grades (the markers being Dubai and Oman crudes) and the North Sea Brent sweet grade of London.
  • The ratio of actual sour and sweet consumption (domestic and imports) by all Indian refiners in the previous year is used as weights in calculating the current price of the Indian basket.
  • The Indian basket of Crude Oil represents a derived basket comprising of Sour grade (Oman & Dubai average) and Sweet grade (Brent Dated) of Crude oil processed in Indian refineries in the ratio of 75.50 : 24.50 during 2018-19.
  • Crude oil prices are average of daily prices of respective month. Via Petroleum Planing & Analysis Cell (Ministry of Petroleum & Natural Gas, Government of India).
  • This calculation is only indicative and is not used even to work out the ex-refinery prices.

Crude oil can be light or heavy, and sweet or sour. Light crudes yield more gasoline, naphtha and kerosene while heavy ones give more diesel, fuel oil and residue. Refineries the world over process a mix based on regional demand.

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How are prices of Major petroleum products i.e. Petrol, Diesel, PDS Kerosene and Domestic LPG are decided?

The prices of petrol and diesel have been made market determined by the Government effective from 26th June, 2010 and 19th October, 2014 respectively and since then their prices are being decided by the Public Sector Oil Marketing Companies (OMCs) namely, Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited, in line with the changes in the international market prices and other market conditions. The Public Sector OMCs not only increase but also decrease the prices accordingly.

Brent Crude

  • Brent North Sea Crude, commonly known as Brent crude, is the international benchmark price used by the Organisation of Petroleum Exporting Countries (OPEC)
  • Roughly two-thirds of all crude contracts around the world reference Brent Crude, making it the most widely used marker of all.
  • These days, “Brent” actually refers to oil from four different fields in the North Sea: Brent, Forties, Oseberg, and Ekofisk together are known as BFOE.
  • Crude from this region is light and sweet, making them ideal for the refining of diesel fuel, gasoline, and other high-demand products. And because the supply is waterborne, it’s easy to transport to distant locations.
  • Brent has a sulfur content of 0.37%. The lower the sulfur content of the oils the ‘sweeter’ the oil and the easier it is to refine. Both WTI and Brent are considered sweet crude.
  • Brent futures contracts are traded on the Intercontinental Exchange (ICE) in London.
  • American Petroleum Institute (API) gravity is an indicator of the density of crude oil or refined products.
  • The gravity of the oils is rated on a scale from 10 to 70, where the higher the number the less dense the oil.
  • To put this in perspective, if the API is higher than 10 the oil will float on water and if it is lower than 10 the oil will sink. Brent API : 38 

West Texas Intermediate (WTI)

  • WTI is extracted from oil fields in the United States. It is primarily extracted in Texas, Louisiana and North Dakota and is then transported via pipeline to Cushing, Oklahoma for delivery.
  • One of the main three benchmarks in oil pricing, along with Brent and Dubai Crude. WTI is known as a light sweet oil because it contains 0.24% sulfur, making it “sweet,” and has a low density, making it “light.”
  • It is the underlying commodity of the New York Mercantile Exchange’s (NYMEX) oil futures contract and is considered a high-quality oil that is easily refined.
  • The product itself is very light and very sweet, making it ideal for gasoline refining, in particular. WTI continues to be the main benchmark for oil consumed in the United States.
  • Today WTI is the benchmark for oil prices in the US, while the rest of the world – and nearly two-thirds of all oil contracts traded – are on Brent. This makes Brent the global Benchmark.
  • Since the shale boom in the U.S., which resulted in a production increase of WTI, the price of WTI has gone down and usually trades at a discount to Brent.
WTI
BRENT
Location of Extraction
North America
North Sea
Geopolitical
Not as sensitive to geopolitics
Sensitive to geopolitics
Content/composition of the oil
0.24% Sulfur and 39.6 API
0.37% Sulfur and 38 API
Where are the oils traded
NYMEX
ICE

Dubai/Oman

  • This Middle Eastern crude is a useful reference for oil of a slightly lower grade than WTI or Brent.
  • A “basket” product consisting of crude from Dubai, Oman or Abu Dhabi, it’s somewhat heavier and has higher sulfur content, putting it in the “sour” category.
  • Dubai/Oman is the main reference for Persian Gulf oil delivered to the Asian market.

OPEC reference basket or the OPEC reference basket of crude (ORB).

  • The OPEC basket is a weighted average of oil prices from the different OPEC members around the world. Members of the Organization of the Petroleum Exporting Countries (OPEC) contribute data which forms the basis of the basket.
  • The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Djeno (Congo), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).

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