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crude oil

Crude oil is a naturally-occurring substance found in certain rock formations in the earth. In the crude oil industry, there are oil names (such as Brent Light Crude Oil and Bonny Light) and there are oil types (such as light, heavy, sweet and sour). Light oil has a low density viscosity, while heavy oil is of higher density. Sweet oil has less sulfur, and sour oil has excessive sulfur. The world market prefers light, sweet crude oil, largely because it requires less refinement and production time before going to market.

Crude oil has its own ticker symbol, contract value and margin requirements, just like every commodity. In order to successfully trade it, you must be aware of these key components and understand how to use them to calculate your potential profits and loss.

Crude oil is priced in terms of regional blends, each with different characteristics. Of these, certain blends are followed by traders, as they most reflect the overall value of oil, and therefore affect the way different blends are priced. These are essentially like a Consumer Price Index for different types of oil. About 161 different types of crude are traded around the world.

There are three primary benchmarks, West Texas Intermediate (WTI), Brent Blend, and Dubai Crude.

Other well-known blends include the OPEC Reference Basket used by the Organization of Petroleum Exporting Countries, Tapis Crude traded in Singapore, Bonny Light used in Nigeria, Urals oil used in Russia and Mexico's Isthmus.