Many of us don’t understand that the oil we pull out of the ground in Oklahoma possesses totally different characteristics in comparison to the oil which comes through the Middle East or Canada.
As John Schiffner of Swan Energy explains, you’ll discover two aspects which commonly define the attributes of oil that make these dissimilarities.
The very first aspect is known as API gravity.
API is short for American Petroleum Institute. This is a statics currently in use to gauge how weighty or light petroleum liquid is when compared to water.
If the API gravity is lower than 10, it’s heavier than normal water and sinks; if the API gravity is greater the 10 then it is lighter than water and floats above water; API is measured in “degrees.Most petroleum valuations show up between 10 and 70 API gravity degrees.
Usually oil with an API gravity in between 40 and 45 commands the best selling prices. Oil which has an API above 45 degrees is less worthy to refine because of variations to the molecular structure.
The API gravity from the oil that Swan Energy is at present pulling out of its wells in Oklahoma is around 38.00 to 42.00 degrees.
Yow will discover three main forms of oil based on API Gravity:
* Light crude oil: API gravity greater when compared to 31.1 degrees * Medium crude oil: API gravity in between 22.3 and 31.1 * Heavy crude oil: API gravity less than 22.3 * Extra heavy crude oil: API gravity beneath 10.00
There’ll probably be some differences in grading from party to party, but this will provide you with a very good guideline to conceptualize the grades of oil.
The second aspect is how sweet or sour oil may be. This may be depending on the sulfur content of the petroleum. Petroleum is called “sweetwhether it is made up of lower than 0.5% sulfur. “Souroil refers to petroleum which has in excess of 0.5% sulfur.
The term “sweetemanates from the nineteenth century prospectors which would taste small amounts of the oil to find out its quality; the low amount of sulfur gives the oil with a mildly sweet taste and satisfying scent.
Sour oil is far more prevalent than sweet oil. Sour oil is located in Canada, the Gulf of Mexico, regions of South America in addition to a lot of the Middle East; sweet crude is way more commonly manufactured in the Central United States, a lot of Africa, the Asia Pacific and the North Sea.
Sweet crude oil is preferred as it requires less processing so as to remove impurities. Light sweet crude has the greatest demand while heavy sour crude is traded for much less. The oil which Swan Energy is currently acquiring out of Oklahoma is thought to be Light Sweet Crude.
Through the use of these two factors, oil will then be priced on the world market using the different sorts of oil. There’s two significant benchmarks for world oil prices: WTI crude oil and Brent crude oil
Despite the fact that each are light sweet crude oils, traditionally WTI trades at a premium (by just some bucks a barrel) because it is mostly lighter and sweeter. Swan Energy markets the oil manufactured by the Joint Venture wells utilizing the WTI index not the Brent index.
In 2010, for the very first time, this changed and right now WTI is trading below Brent by as much as 20%.
The difference between WTI and Brent began at the conclusion of 2010 and was highlighted in February of 2011. You can find two main factors contributing to this. First are the Libyan situation and the Arab Spring, which diminished supply of light sweet crude to Europe. The second, which could be more long lasting than the Libyan crisis, is the oversupply at the principle storage area facility in Cushing, Oklahoma.
As the new pipelines from Canada came online together with oil production boosts in North Dakota and Colorado combined with the two pipelines sending oil up from the Gulf resulted within the Midwest refiners becoming oversupplied with oil
What may also be an element is the oil coming from these areas may not compare in level of quality to the sunshine sweet crude oil from the Midwest. These elements are all playing an element in creating a large delta between Brent and WTI.
There are numerous analysts that think that market manipulation may perhaps be playing an element too. In essence we must wait and see what goes on as the crisis in Libya settles down and as increasingly more oil coming form Canada and North Dakota is getting delivered by truck and train to the Gulf.
Eventually, demand stays high and though we may see temporary growth in supply, oil supply is nonetheless reducing world wide which will keep oil prices high, as obvious by the escalating WTI prices because it closes the gap in between Brent and WTI on the conclusion of October and outset of November.
For more information on the differences between WTI and Brent oil, visit this website.
To get more information on the differences between WTI and Brent oil, visit this website.
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