OPEC Basket

What Is the OPEC Basket?

The OPEC Basket is a weighted average of oil prices from the different OPEC members around the world. Members of the Organization of the Petroleum Exporting Countries (OPEC) contribute data that forms the basis of the basket. The basket is a benchmark, or reference point, for those monitoring the oil price and the stability of the global oil market.

The OPEC Basket is otherwise called the OPEC Reference Basket (ORB) or the OPEC Reference Basket of Crude.

Figuring out the OPEC Basket

The OPEC Basket relies upon specific petroleum blends from OPEC member countries and is a weighted average. A weighted average is a mean, calculated by giving values to data impacted by some attribute. On account of the OPEC Basket, the principal attribute is the weight of the crude oil.

As of December 2020, the OPEC Basket averaged the prices of crude oils from thirteen member states. They included Saharan Blend from Algeria, Girassol from Angola, Djeno from Congo, Zafiro from Equatorial Guinea, and Rabi Light from Gabon. Iran Heavy, Basra Light from Iraq, Kuwait Export, and Es Sider from Libya were additionally part of the basket. Bonny Light from Nigeria, Arab Light from Saudi Arabia, Murban from the United Arab Emirates, and Merey from Venezuela round out the rundown.

A portion of the OPEC oils have higher sulfur content than crude oils from different countries. Hydrocarbons or crude oil that have higher sulfur contents are more costly to refine. Hence, the price of the OPEC Basket is generally lower than other oil reference prices.

Crude oil with unreasonable contaminations is unsuitable for some purposes except if it is broadly handled.

Numerous different countries all through the world likewise produce oil. In any case, they are not OPEC members. Russia, the United States, China, and Canada are major oil producers yet not OPEC members. OPEC's member countries produce a substantial part of the world's oil.

Oil prices matter a great deal to the global economy in light of the fact that the production and distribution of all consumer goods rely upon petroleum. Oil fuels the trucks that transport goods, the farm vehicles that furrow agricultural fields, the cars that consumers use to get to the market, and substantially more. OPEC gives a way to the member oil-delivering countries to make stable market conditions for themselves by raising or bringing down production.

The OPEC Basket versus Other Crude Oil Benchmarks

There are various crude oil benchmarks, addressing in excess of 200 assortments of crude oil. They change substantially in both price and overall quality. A portion of the leading alternatives to the OPEC Basket include:

• West Texas Intermediate (WTI) crude oil is a lighter, higher quality oil. It sells for about $5 to $6 more than the OPEC Basket price.
• The Brent blend from the North Sea is generally refined in Northwestern Europe. It sells at about $4 over the OPEC Basket price.

Benefits of the OPEC Basket

The principal utilization of the OPEC Basket is setting and achieving OPEC price targets. Whenever individuals hear reports about OPEC raising oil prices, the price they are catching wind of is the OPEC Basket price. There is a substantial competition between different crude oils in light of the fact that the majority of them are moderately close substitutes. Nonetheless, the direct goal of OPEC members is to raise the price that they receive for their own oil in the global market. Since the OPEC Basket is a weighted average of OPEC members' oil prices, it is ideal for setting the organization's goals and measuring its prosperity.

Analysis of the OPEC Basket

Since it is just an average, the OPEC Basket isn't a type of crude oil that organizations can buy directly. All things being equal, they must buy some particular oil, for example, Kuwait Export or Arab Light. These crude oils change in price and quality, so the OPEC Basket isn't exceptionally helpful for [oil refineries](/oil-processing plant).

Genuine Example of the OPEC Basket

On April 26, 2018, the OPEC Basket remained at $71 per barrel. This price addresses a consistent rise over the previous month. On March 26, 2018, the ORB was $66.80. A year before, it remained at about $51.47 and rose consistently all through 2017.

Features

• The OPEC Basket is a weighted average of oil prices from the different OPEC members around the world.
• The primary utilization of the OPEC Basket is setting and achieving OPEC price targets.
• Since it is just an average, an OPEC Basket isn't a type of crude oil that organizations can buy directly.