- 1). Compare the quality of the crude. Generally, the "lighter and sweeter" varieties of crude are relatively low in density and sulfur. This tends to make them it valuable, since it is easier to refine. The benchmark crude West Texas Intermediate is generally priced lower than its heavier, more sour counterpart, known as Russian Export Blend.
- 2). Compare its location. When calculating how much money a seller can command, buyers also must consider how much they will be paying in freight costs to bring the crude to refineries. As a rule of thumb, the higher the freight cost, the higher a discount the seller will have to offer.
- 3). Identify demand for crude oil. The price of two different oils will also depend on the relative demand of the markets closest to them. If two crude varieties have similar freight costs, the price usually is higher for the crude in an area of greater demand.
- 4). Identify demand for petroleum products. The price of crude oil is not just determined by the demand for the oil itself, but the demand for the refined products that can be made from it. For example, spikes in the demand for gasoline can push up the price of crude oil as refiners scramble to produce more of it.
- 5). Compare the competition. Competition in crude markets from suppliers also works to drive down the price. If a crude in one area is the only oil available, the price may well be higher than an area--usually an oil-producing region--in which several companies are offering their varieties of crude.
- 6). Examine the refining capacity. The price that a buyer will pay for crude oil is also based on the ability of nearby refineries to process if. Some refineries are better suited to producing expensive fuels, while other less sophisticated refineries can only produce cheaper products. A buyer should investigate this before determining how much to pay for the oil.
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