Sour Crude

What Is Sour Crude?

Sour crude is a type of crude oil known for its relatively high sulfur content. The presence of sulfur makes oil more difficult and costly to refine, causing sour crude to be viewed as a less desirable form of crude oil.

By contrast, sweet crude oil is known for its low sulfur content and commands a higher price on international commodity markets.

How Sour Crude Works

Crude oil is defined as "sour" if its sulfur content exceeds 0.5%, or if it does not meet the required thresholds for hydrogen sulfide and carbon dioxide levels. Sweet crude, on the other hand, is defined by the New York Mercantile Exchange (NYMEX) as petroleum with sulfur levels below 0.42%.

This distinction between sour and sweet crude is important because it affects the cost of refining the oil. In turn, this makes the more costly sour crude less efficient as a source of energy production, decreasing its demand from commodity investors. In an effort to reduce their total processing costs, sour crude producers often seek to refine sour crude into heavy oil products such as diesel and fuel oil (as opposed to gasoline). 

Nevertheless, unless the price of oil remains high enough to justify increasing sour crude production, sour crude projects are often delayed or abandoned due to being uneconomical as compared to alternative energy sources.

Whereas many sour crude projects have been terminated over the years due to lack of investor interest, light sweet crude oil futures remain the most actively traded energy products in the world. This is clearly reflected in the West Texas Intermediate (WTI) commodity futures contract, which is traded on the NYMEX. This highly liquid futures contract is widely used among companies and investors in the energy sector, as a means of speculating on energy prices and managing risk through hedging activities.

Process for Preparing Sour Crude

Sour crude is produced largely in Venezuela, Colombia, Ecuador, the Canadian province of Alberta, the Gulf of Mexico, Alaska, Saudi Arabia and other parts of the Middle East.

In order to prepare sour crude for sale on commodities markets, oil refineries must use a process known as cracking to separate the dozens of hydrocarbon compounds contained in the oil into separate chemical units. The refineries must also eliminate various contaminants in order to produce saleable products.

Refineries generally prefer sweet crude oil due to its low sulfur content and relatively high yields it produces of high-value products such as gasoline, diesel fuel, heating oil and jet fuel.