Yes, crude oil is a commodity and therefore, by definition, substitutable between sources. However, unlike other commodities like the metals or the agriculturals, all crude oils are not created equal. Indeed neither are agricultural crops. Corn or sugar have specific grades with specific standards by which other grades are measured and therefore sell at premiums to or discounts from. Those standards are called benchmarks. WTI and Brent are benchmark products. However unlike corn or sugar whose variability’s are generally minor, crude oil varies greatly. The most important variables are weight, called specific gravity, which means how dense the stuff is, and “sweetness”, which refers to the sulfur content. Both of these variables directly affect the costs at which refineries can process the crude into refined products. Therefore practically all outputs sell at discounts or premiums relative to the benchmarks. This is the reason that Brent is blended together from the outputs form the over forty fields in the North Sea. More on this blending feature below.
Crude Oil Supply Battles keeping WTI and Brent Apart
Daily Analysis - 20/12/2017