War Stories: How much sugar does it take to make sweet crude?

August 9, 2016 By

August 8, 2016

James Langley

In the early days of Russian oil trading I received a call from a client in Moscow. The client needed expert help in solving a crude oil trading and blending question. He asked:

“How much sugar does it take to convert a barrel of sour crude into a barrel of sweet crude?”1

After closing my mouth and taking a deep breath, and being a good consultant who tries not to jump to conclusions, I said, “That’s an interesting question. Tell me more about what you are trying to do.”

As he described his business, and the needs of his customer, it became clear that he understood the crude trading business very well, and that his question was indeed legitimate.

My client had Urals crude (a sour crude oil) available in his supply, but his customer needed sweet crude oil for processing in his refinery. The refiner only had cash to pay the sour price for crude, but being in Cuba, could offer in barter a quantity of sugar in addition to cash. The better question, “How much sugar is required to get sweet crude instead of sour crude?” His question related to a three-way commodities exchange, and the crude supplier needed broad commodities knowledge for pricing, logistics and financing.

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1 “Sour” crude contains high levels of sulfur, and is usually lower in value. “Sweet” crude is low in sulfur.