Sour Crude

DEFINITION of 'Sour Crude'

The name given to barrels of crude oil that do not meet certain content requirements, including low levels of hydrogen sulfide and carbon dioxide. Petroleum is considered "sour" if the total sulfur level is greater than 0.5%. Sulfur is an impurity that has to be removed before oil can be refined, which increases the costs associated with processing. Often, sour crude oil is processed into heavy oil like diesel and fuel oil (instead of gasoline) to decrease processing expenses. For safety reasons, sour crude oil must be stabilized prior to being transported by oil tankers. This is achieved by removing the hydrogen sulfide gas (H2S).

BREAKING DOWN 'Sour Crude'

The world's major producer of sour crude is Venezuela. Other producers include Canada, the United States, Mexico, Columbia, Ecuador and several Middle Eastern nations. Petroleum is considered "sour" if it contains more than 0.5% sulfur (or 1% by certain definitions), and "sweet" if it contains less than 0.5% sulfur. The term "sweet" was originally used to describe the mildly sweet taste and agreeable smell of the low-sulfur sweet crude oil.

Crude oil is called "crude" because it contains many different hydrocarbon compounds. An oil refinery must separate the dozens of hydrocarbon compounds into separate chemical units, eliminate the contaminants and covert or transform the chemical units into gas. Refiners generally prefer sweet crudes because of the low sulfur content and relatively elevated yields of high-value products including gasoline, diesel fuel, heating oil and jet fuel.

The first sour crude oil futures began trading in June 1990 on the Singapore International Monetary Exchange. Many sour crude products have been launched and terminated due to lack of investor interest. Light sweet crude oil (WTI) futures and options, on the other hand, are the most actively traded energy products in the world. WTI helps manage risk in the energy sector because the contract has the most liquidity, highest number of customers, and excellent transparency. Both full-sized and e-mini futures contracts are traded on through the CME Group's CME Globex, CME ClearPort and Open Outcry (New York) trading venues.

RELATED TERMS
  1. Sweet Crude

    A type of oil that meets certain content requirements, including ...
  2. West Texas Intermediate - WTI

    Light, sweet crude oil commonly referred to as "oil" in the Western ...
  3. Oil Refinery

    An industrial plant that refines crude oil into petroleum products ...
  4. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
  5. Petroleum

    A naturally occurring liquid found beneath the Earth’s surface ...
  6. Brent Blend

    A type of sweet crude oil that is used as a benchmark for the ...
Related Articles
  1. Economics

    Ending The Limits On U.S. Crude Oil Exports

    As US storage capacity reaches its limit, industry participants and their lobby groups in Washington are calling for an end to the crude oil exports ban.
  2. Investing

    The Reasons for the Mexican-U.S. Oil Swap

    The U.S. government is getting close to a historic deal to allow U.S. producers to swap the light, sweet crude oil that is in too much supply with Mexico, in return for heavy crude.
  3. Investing Basics

    Learn How To Trade Crude Oil in 5 Steps

    Crude oil and energy markets are specialized venues. Here are five steps to take to build consistent profits.
  4. Term

    Determining Oil Prices With Benchmarks

    The many types of crude oil and the different sites from which it’s extracted means buyers need an easy way to value the commodity based on quality and location.
  5. Economics

    The End of US Foreign Oil Dependency

    Learn about how U.S. production of oil is increasing on an annual basis and how oil imports are dropping, and why Congress may lift a ban on the export of oil.
  6. Investing News

    Will Lifting The U.S. Export Ban Affect Oil Prices?

    The United States is expected to repeal an oil export ban next Thursday. Will it make a difference to international oil prices?
  7. Investing Basics

    What is Crude Oil?

    Crude oil is a natural petroleum product that’s composed of organic materials, including hydrocarbon deposits.
  8. Stock Analysis

    Is Now the Right Time to Buy Oil Stocks?

    Learn about the oil industry and how crude oil effects the prices of oil stock. Understand if now is a good time to purchase oil stock.
  9. Investing Basics

    American Oil Production's Amazing, Crude Future

    Is America producing more crude oil than it is consuming? How is technology changing the American oil industry? What will domestic oil industry look like in the near future?
  10. Mutual Funds & ETFs

    (USO, OIL, UWTI) 3 Bond ETFs in the Oil Sector

    Find out more about exchange-traded funds (ETFs) that track the oil sector, such as the United States Oil Fund and the iPath S&P GSCI Crude Oil TR ETN.
RELATED FAQS
  1. Do all oil companies received the quoted price of West Texas Intermediate for their ...

    Learn about the three benchmark oil prices, the primary factors that determine the quality of crude oil and the price it ... Read Answer >>
  2. What is a heavy oil differential and how does it affect oil producers?

    Learn what the phrase "heavy oil differential" refers to and the significance of heavy oil differentials for oil production ... Read Answer >>
  3. How can I hedge against rising diesel prices?

    In early 2007, the New York Mercantile Exchange announced that traders would be able to buy or sell futures contracts on ... Read Answer >>
  4. What economic indicators are especially important to oil traders?

    Economic indicators are used by traders and investors in an attempt to understand the underlying fundamentals of the market. ... Read Answer >>
  5. What does a barrel of oil equivalent (BOE) refer to in the oil and gas sector?

    Find out about the oil and gas industry, what a barrel of oil equivalent refers to and what it measures in the oil and gas ... Read Answer >>
  6. What percentage of the global economy is comprised of the oil & gas drilling sector?

    Read about a rising industry that already composes as much as one-twentieth of total global economic output: the oil & gas ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center