Tuesday 15 December 2009

Saudi’s switch to sour crude standard ripples out to Gulf - More expensive to refine the heavier grade of oil, but costs less than ‘sweet’ commodity

Futures exchanges in the United States and London hope their new sour oil contracts will take off as Saudi Arabia starts pricing sales in the U.S. against sour crude after 15 years of linkage to the sweet type.

Nearly two-thirds of global oil supplies now are heavy sour, a high-sulfur crude that contrasts with the sweet, high-grade, low-sulfur type. The heavier or more sour the oil, the more expensive it is to refine.

Dan Brusstar, energy research director at CME Group, which owns the New York Mercantile Exchange, said a key reason for launching Argus sour futures was a decision by Saudi Arabia’s national company, Aramco, this fall to adopt the new Argus Sour Crude Index as its measure for pricing U.S. deliveries starting in January.

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