Lots of individuals do not understand that oil Swan Energy takes out of the ground in Oklahoma provides different qualities compared to oil which comes out of the Middle East or Canada
There is two variables that generally specify the features of oil that create these variations.
The primary aspect is called API gravity. API is short for American Petroleum Institute; this is a statistic which can be used to determine how heavy or light petroleum liquid is when compared with h2o. If the API gravity is lower than 10, it is actually weightier than normal water and sinks; if the API gravity is greater the 10 then it's lighter than water and floats above water. API is measured in "degrees." Most petroleum valuations show up between 10 and 70 API gravity degrees.
Generally oil with the API gravity in between 40 and 45 commands the greatest price ranges. Oil which has an API above 45 degrees is less worthy to refine as a result of variations to the molecular framework.
The API gravity of the oil that Swan Energy is currently removing out of its oil wells in Oklahoma John Schiffner explains, is about 38.00 to 42.00 degrees.
You can find three primary categories of oil based upon API Gravity:
- Light crude oil: API gravity greater when compared to 31.1 degrees
- Medium crude oil: API gravity between 22.3 and 31.1
- Heavy crude oil: API gravity lower than 22.3
- Extra heavy crude oil: API gravity under 10.00
There could be a few differences in grading from party to party, but this may provide you a good baseline to understand the grades of oil.
The second aspect is how sweet or sour oil might be. This is often based on the sulfur content of the petroleum
Petroleum is regarded as "sweet" if it contains lower than 0.5% sulfur. "Sour" oil describes petroleum which has over 0.5% sulfur.
The phrase "sweet" comes from the nineteenth century prospectors that would taste small quantities of the oil to establish its quality. The lower level of sulfur provides the oil with a mildly sweet flavor and pleasant smell.
Sour oil is a lot more widespread than sweet oil. Sour oil is located in Canada, the Gulf of Mexico, regions of South America as well as the majority of the Middle East; sweet crude is a lot more frequently produced in the Central United States, nearly all of Africa, the Asia Pacific and the North Sea.
Sweet crude is favored since it requires less processing in order to eliminate pollutants. Light sweet crude has the greatest demand while heavy sour crude is traded for much less. The oil that Swan Energy is now acquiring out of Oklahoma is regarded as Light Sweet Crude.
Using these two factors, oil will be priced on the world market while using different kinds of oil. There are two key benchmarks for world oil prices: WTI crude oil and Brent crude oil. While each are light sweet crude oils, historically WTI trades at a premium (by just a few dollars a barrel) because it's generally lighter and sweeter. Swan Energy sells the oil produced by the Joint Venture oil wells utilizing the WTI index not the Brent index.
In 2010, for the very first time, this changed and today WTI is trading below Brent by as much as 20%.
The variance in between WTI and Brent began at the end of 2010 and was highlighted in February of 2011. You can find two main elements contributing to this. First are the Libyan situation and the Arab Spring, which decreased supply of light sweet crude to Europe
The other, that could be more long lasting than the Libyan situation, is the oversupply at the primary safe-keeping facility in Cushing, Oklahoma.
As the new pipelines from Canada arrived online together with oil production increases in North Dakota and Colorado merged with the two pipelines delivering oil up from the Gulf resulted in the Midwest refiners becoming oversupplied with oil
What can also be an aspect is the oil coming from these places might not compare in level of quality to the light sweet oil from the Midwest. These aspects are all actively playing a major part in creating a large delta in between Brent and WTI.
There are several analysts that feel that market manipulation might be actively playing a component too. In summary we will need to wait and see what goes on as the situation in Libya settles down and as increasingly more oil arriving form Canada and North Dakota is being transported by truck and train to the Gulf.
Eventually, need continues to be high and though Swan Energy thinkgs might see temporary growth in resource, oil supply is still diminishing world wide which will continue to keep oil prices high, as apparent by the growing WTI prices as it closes the gap between Brent and WTI at the end of October and outset of November.