A

Aframax
Vessels of between 80,000 and 120,000 deadweight tonnage.

American Petroleum Institute (API)
The primary US oil industry trade association, API conducts research and sets technical standards for industry equipment and products from wellhead to retail outlet. It also compiles statistics that are regarded as industry benchmarks. See www.api.org.

API gravity
A measure of the weight of hydrocarbons according to a scale established by the American Petroleum Institute. Crude oils with higher values are lighter and tend to produce larger volumes of lighter products in atmospheric distillation, which makes them relatively more valuable. Crude oil grades that are lower on the API scale tend to be less highly valued because they produce smaller yields of lighter products.

Arbitrage
The simultaneous purchase of a commodity-derivative-security in one market and the sale of the same, or similar asset in another market in order to exploit price differentials. Grade arbitrage is trading the difference in the price of a commodity in the same location -- e.g. the difference in the prices of two sweet crudes in Northwest Europe. Geographical arbitrage is trading the difference in the price of the same grade in different locations.

Aromatics
Hydrocarbons with a distinctive, pleasant smell, hence the name, characterized by having at least one benzene ring in their molecule. Present in the various fractions obtained from the primary distillation of crude oil and, more notably, in products deriving from some improvement processes including catalytic reforming of virgin naphtha, which is mainly used to increase the low level of octane. Commercial petroleum aromatics include benzene, toluene and xylene (BTX).

Assay
A laboratory assessment of the characteristics of a crude oil that helps determine its market value and refining capabilities. Assays of some kind are usually required as part of all crude oil sales.

Atmospheric distillation
The primary phase of all refining in which crude oil or other raw feedstock is boiled and the vapors are collected and condensed to create basic petroleum products.

B

Backwardation
A relationship between prices in which the cost of prompt, immediately available supplies exceeds the price of volumes available in the future. (See Contango.)

Ballast tank
A tank intended to be filled with seawater to keep floating equipment stable.

Basin
A large, natural depression on the earth's surface in which sediments, generally brought by water, accumulate.

Benchmark crude
A crude oil that is traded so regularly in the spot market that its price quotes are relied upon by sellers of other crude oils as a reference point for setting term or spot prices. Brent, West Texas Intermediate and Dubai are all benchmark crude oils.

Blending
Refiners can often boost the quality of straight-run refinery production, re-use "off-spec" material and upgrade lower-quality imports by adding components. Blending occurs for all major products except liquefied petroleum gas, but is most common in gasoline as refiners seek to meet more stringent and often niche market standards.

Blendstock
Oil components used in blending.

Blow out
Uncontrolled flow of oil, gas or water from a well.

Borehole
The hole created in the earth when a well is drilled or bored.

Break-bulk
The practice of breaking large imported cargoes into smaller, easier to handle lots.

Brent, Forties, Oseberg (BFO)
A pricing mechanism for the Brent crude market, which allows the delivery of Forties and Oseberg as alternative grades to Brent. The system was devised by pricing service Platts in 2002 to replace the traditional Brent price index and was intended to limit manipulation of the index as liquidity dropped.

Brent market
A widely traded group of spot, forward and futures markets in North Sea Brent crude oil that emerged in the early 1980s. They are used as a key source of international oil price risk management and as a benchmark for crude oil pricing under both term and spot transactions. Forward trading extends several months ahead with supplies becoming "wet" at least 21 days prior to loading. A parallel futures market in Brent also exists on London's ICE Futures Exchange.

Brent B-wave pricing
A weighted average of Brent futures prices. This new "B-wave" pricing formula was first adopted by Saudi Arabia in July 2000 (followed by Kuwait and, six months later, by Iran) for oil pricing in its term contract sales to Europe. It replaced the traditional dated Brent benchmark.

Bunker fuel
Oil consumed as fuel by ships -- usually residual fuel oil, but sometimes diesel.

C

CFD
See Contract for differences.

CFR; C&F (Cost and freight)
A pricing term indicating that the cost of the goods and freight charges are included in the quoted price; the buyer arranges for and pays insurance.

Casing
Set of steel tubular elements used to line the inner wall of a drill hole, to consolidate it. The casing is secured by cementing the annular space between the hole wall and the casing. Each time tubing is installed, the well diameter is reduced, so that the tubing in a well forms a telescopic assembly. The tubes have a standard length of nine meters, and are assembled by threaded sleeves.

Catalyst
A material that accelerates or retards a chemical reaction without being chemically affected itself (although it may be physically changed or even destroyed).

Catalytic cracking (cat cracking)
A secondary refinery upgrading process that converts heavy, processed feedstocks, such as vacuum gas oil into lighter products such as gasoline by passing the feedstock over a heated catalyst in order to break down, or crack, the heavy hydrocarbons into lighter ones.

Catalytic hydrotreating
A refining process that uses hydrogen and catalysts with relatively low temperatures and high pressures for converting middle-boiling or residual material to high-octane gasoline, reformer charge stock, jet fuel, and/or high-grade fuel oil. The process uses one or more catalysts, depending upon product output, and can handle high-sulfur feedstocks without prior desulfurization.

Cetane Index/cetane number
A measure of the ignition quality of diesel fuel that indicates the tendency of the oil to ignite spontaneously under pressure, which is a desired characteristic for diesel engines but not for gasoline engines. Cetane number is an estimation of the Cetane Index calculated from distillation data and density.

Christmas tree
A combination of gauges, valves, controls and pipe connections at the top of the casing on a flowing well that controls well flow and resembles a heavily decorated Christmas tree. Another name for a wellhead.

c.i.f. (cost, insurance and freight)
A price that covers delivery to a specified destination and insurance for that transportation.

Cloud point
The temperature at which paraffins in diesel fuel begin to crystallize (becoming cloudy) when it is cooled. As the paraffins crystallize, they form platelets that clog engine filters. Commercial diesel fuels will fail at temperatures near the cloud point, which is usually a maximum of around 10° Fahrenheit.

Coke
A solid material similar to coal that can be produced from processing of heavy oil.

Coker
A deep-conversion refinery unit that cracks feedstock severely at high temperatures. It takes low-quality residue and transforms it into light products and petroleum coke, completely destroying the residue.

Components
Semifinished hydrocarbon compounds and chemical additives used to improve the quality of products through blending. The term normally applies to gasoline blendstock.

Con-carbon number (Conradson carbon or CCR)
A measure of the amount of unwanted carbon produced in the refining process, with higher values indicating a less desirable feedstock.

Condensates
Liquid hydrocarbons that are produced in conjunction with natural gas. They are chemically more complex than liquefied petroleum gases and are sometimes similar to crude oil or naphtha.

Condensate splitter
Simple refinery unit specifically designed to handle condensate. Condensates yield more than 50% naphtha, so a conventional crude distillation unit would soon bottleneck as it reaches the limit of its light-ends capacity.

Contango
The reverse of backwardation. A relationship between prices in which prompt, immediately available oil sells at discount to future supplies.

Contract for differences (CFD)
A financial arrangement used in swaps and other financial dealings in which the arithmetic difference between two similar but opposite transactions is exchanged rather than the total amounts involved. The term CFD is used in oil trading largely to refer to these types of price swaps in the short-term Brent crude oil market, which provide a way to hedge the difference in price between spot supplies known as "dated" and first-month forward supplies known as "21-day".

Crack spread
A set of futures market transactions that attempts to simulate the commercial position of a refiner as a buyer of crude oil and a seller of refined products. The purpose is to duplicate the profit margin that exists in refining. The most popular crack spread on Nymex is known as the "3-2-1", or the purchase of three crude oil contracts against the sale of two gasoline contracts and one heating oil contract. This relationship may be reversed in winter when heating oil is in greatest demand.

Cracked residue
The residual oil that is left over after the cracking process. Usually only suitable for use as residual fuel oil or as feed for a coker. (See Cracker.)

Cracker
An upgrading unit that converts heavier oils into light products by means of a catalyst (a catalytic or cat cracker) or by means of adding hydrogen in the presence of a catalyst (a hydrocracker).

Crude
Petroleum in its raw state as it emerges from the ground with only minor processing to remove associated natural gas and gas liquids. This processing is usually done at or near the production site. Some synthetic oils that are produced from tar sands, extra-heavy oils or types of shale are refined like crude oil. Condensates are also very similar to crude oil, but usually lighter, and they are often refined like them.

Crude distillation
Simple refinery process whereby crude oil is heated and the different factions collected and cooled to form -- from lightest to heaviest -- liquefied petroleum gas, gasoline, naphtha, kerosene, gas oil and fuel oil. Crude distillation units are often referred to as distillation towers.

Cut
One or more crude oil compounds that vaporize and are extracted within a certain temperature range during the crude distillation process.

D

Daisy chain
The process by which a cargo of oil or oil products is sold many times before being delivered to the customer. The term is used to describe the paper chain formed by the passing of a 21-day Brent cargo (i.e., 21 working days ahead of its loading date) from the equity holder through a sequence of deals.

Deadweight tonnage (dwt)
A rough measure of the carrying capacity of a tanker.

Demurrage
An extra payment due to a shipowner if a tanker is forced to wait before loading or discharging.

Depletion
The exhaustion of a natural resource by actual extraction of the mineral or gas, etc. The decrease in value (of mineral or gas rights, timberland, etc.) caused by production operations.

Derivatives market
A market where the value of the contract being traded is derived from an underlying commodity such as crude oil. These markets typically involve forward purchases or sales and can take the form of futures markets or over-the-counter swaps and options.

Development cost
For a given period, costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing oil and gas.

Distillate
The result of crude distillation and therefore any refined oil product. Distillate is more commonly used as an abbreviated form of middle distillate. Middle distillates consist of kerosene and gas oil -- automotive diesel, heating oil and general purpose gas oil. Also used in refinery nomenclature to label units designed predominantly for middle distillate production, e.g. distillate hydrotreater or distillate hydrodesulfurization unit.

Distillation curve
A graph that plots the percentage (by volume) of a given grade of crude that boils off as a function of temperature. Since the boiling points of the various crude cuts are constant, the distillation curve shows the percentage of each compound in a given grade or batch of crude.

Distillation tower
A tall, column-like vessel in which crude oil is heated and its vaporized components distilled by means of distillation trays. Also used to remove impurities added during the refining process.

Dubai market
A widely traded international forward market in Mideast Dubai crude oil that emerged in the mid-1980s and is used as both a risk-management tool and a benchmark for crude oil pricing east of Suez. Forward trading usually extends for two or three months.

Dubai Mercantile Exchange (DME)
DME, a 50-50 joint venture between Nymex and Tatweer, is the Mideast's first energy and commodity futures exchange. Trading is due to begin in 2007, with the launch of the world's first physically delivered Mideast sour crude futures contract, the Oman Crude Oil Futures. DME is also planning a Mideast-based jet fuel futures contract.

E

Energy Information Administration (EIA)
The EIA is the statistical arm of the US Department of Energy. It produces numerous market moving reports on US energy supply and demand, most notably a weekly report detailing crude and product inventories in various geographical areas known as PADDs (Petroleum Administration for Defense Districts). The report covers US refinery throughput, as well as crude and product imports and exports. Information is also provided on international oil markets, gas and electricity. See www.eia.doe.gov.

Enhanced oil recovery (EOR)
The use of certain methods such as water flooding or gas injection into existing wells to increase the recovery from a reservoir.

Exchange of futures for physical (EFD)
A financial transaction that allows the conversion of a futures position into a physical position via simultaneous buy-sell transactions. Also referred to as exchange of futures for product.

Exploratory test well
A well drilled in an unproven or semiproven territory for the purpose of ascertaining the underground presence of a commercial petroleum deposit. Also referred to as an appraisal (delineation) well.

F

Farm-out
An agreement whereby an outside party pays to join an existing effort to explore and develop a specific hydrocarbon province. Such agreements are designed to spread the risk among multiple players.

Finding cost
For a given period, costs incurred in examining specific areas that are considered to have prospects for containing oil and gas reserves, including costs of drilling exploratory wells and exploratory-type stratographic test wells. Also known as exploration cost.

Five o'clocking
21 days before a cargo of Brent Blend crude oil loads at the Sullom Voe terminal, the details of the cargo are passed by telex-telephone through the paper chains (see Daisy chain). If the cargo has not been sold by 17:00 hours local UK time, then the last participant to receive the telex-telephone call with the cargo details owns the physical cargo and has been "five o'clocked". Normally this is seen as a bearish sign, as it usually happens in a market with low crude demand.

Floating production, storage and offloading vessel (FPSO)
Vessels equipped with processing facilities for separating gas and oil, moored to a single location for an extended period. Oil and gas from offshore wells are transferred to FPSOs through pipes. Once oil has been processed and stored in the hull, shuttle tankers periodically offload it to other locations, typically export tankers.

f.o.b. (free on board)
A price that only covers the cost of the material and the loading of it onto a ship or into a pipeline prior to transportation. Transportation and insurance are the responsibility of the buyer.

Formula price
A price for crude oil, usually in a term contract, that is determined by a specified relationship to a benchmark crude oil or a group of benchmark crude oil grades or products. The formula also usually specifies the time lag from the point of loading at which the price is determined, the exact average to be used and other variables.

Forward market
An informal market that trades in the future delivery of a specific type of oil, with only some transactions resulting in physical delivery. Unlike a futures market, regulation is much less strict, and there are no clearinghouse or margin payments. These conditions tend to restrict trading to large oil companies and financial entities. (See Brent market and Dubai market.)

Freeze point
The temperature at which a liquid begins to crystallize or form a solid, used in jet fuel specifications where fuel performance at very low temperatures is important. A sample of jet fuel is cooled until crystals form; the sample is then allowed to warm up and the temperature at which all the crystals have disappeared designated its freeze point.

Futures market
A formal exchange that trades contracts for the delivery of a specific type of oil in future months. Only a very small volume results in physical delivery, and in some markets, there is only cash settlement. The presence of a clearinghouse and regular daily margin payments on all positions ensures the financial integrity of the operation at all times. The market is open to all participants.

G

Gas oil
A heavier middle-distillate product that is produced at higher temperatures than kerosene and lower temperatures than residual fuel. Usually used as diesel fuel or home heating oil.

Gasoline
A light distillate product that is usually produced through the reforming of naphtha, cracking of heavier products and blending. It is the goal of most secondary refinery upgrading technologies. Used for internal combustion engines.

Gas-to-liquids (GTL)
A technical process whereby gas -- normally methane -- is converted into a liquid using the Fischer-Tropsch process. The resulting liquid is then hydrocracked into synthetic products. The process produces high-quality middle distillates, particularly automotive diesel, but is very costly.

H

Hedge
A position in a derivatives market that is designed to reduce price risk from a physical transaction. For example, the sale of a derivative in anticipation of future sales of physical supplies of oil or gas provides protection against possible declines in the price of the physical commodity.

Horizontal drilling
A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval.

Houston Ship Channel
Located in East Texas; it is a major US oil refinery center.

Hydrocracking
A secondary refinery upgrading process similar to catalytic cracking that converts heavy, processed feedstocks such as vacuum gas oil into lighter products such as gas oil, kerosene and gasoline by passing the feedstock over a heated catalyst in the presence of hydrogen in order to break down, or crack, the heavy hydrocarbons into lighter ones and add carbon molecules to make the output lighter.

I

Independent
Generally applies to a nonintegrated oil or natural gas company, usually active in only one or two sectors of the industry. An independent marketer buys petroleum products from major or independent refiners and resells them under its own brand name. There are also independents that are active exclusively either in oil or gas production or refining.

International Energy Agency (IEA)
A Paris-based organization of 26 leading oil-consuming countries, operating under the aegis of the Organization for Economic Cooperation and Development (OECD), that coordinates its members' energy policies, including the sharing of oil stocks in times of shortage. It also compiles energy statistics including forward supply-demand projections for countries both within and outside its membership. See www.iea.org.

ICE Futures, Intercontinental Exchange
A London oil futures market trading gas oil and Brent crude oil as well as options. Formerly the International Petroleum Exchange. See www.theice.com.

J

Jet fuel
A high-quality kerosene product primarily used for fuel in commercial-military aircraft engines. Jet fuel is obtained by distillation and sweetening. The latter removes all trace of mercaptans (very light molecules containing sulfur atoms). Jet fuel is a white product, so-called because it is transparent.

Joint development zone
An agreement between two governments that covers the terms for jointly administering the licensing, exploration, production, development and revenue over a shared hydrocarbon province.

K

Kerosene
A middle-distillate fraction that is produced at higher temperatures than naphtha and lower temperatures than gas oil. It is usually used as jet turbine fuel and sometimes for domestic cooking, heating and lighting.

L

Lifting cost
For a given period, costs incurred to operate and maintain wells and related equipment and facilities, including applicable operating costs of supporting equipment and facilities. Also referred to as production costs.

Light naphtha
A category of naphtha that can be rich in paraffins and is used for ethylene cracking to make petrochemicals. However, if it is rich in aromatics and naphthenes it is used for reforming into gasoline or as blendstock for making gasoline.

Liquefied petroleum gas (LPG)
A class of light hydrocarbons that are gaseous at atmospheric pressure but can be liquefied easily under pressure. They are produced as part of the refining process and also in conjunction with the production of crude oil and natural gas. They can be used both as a fuel and as feedstocks for making petrochemicals and other products. The two types are propane and butane.

Liquidity
In the oil market context, this refers to the volume of trading activity and diversity of participants in a particular arena. Greater liquidity allows trades to be executed quickly and easily at a uniform price; a lack of liquidity tends to prevent some interested participants from finding a buyer or seller at a given time. High-volume oil futures markets are the most liquid.

M

Major
This term was coined in the 1970s and traditionally referred to the "Seven Sisters," British Petroleum, Exxon, Gulf, Mobil, Shell, Chevron, and Texaco. More recently, the term is broadly applied to those multinational oil companies that by virtue of size, age or degree of integration are among the preeminent companies in the international petroleum industry.

Margin
For a refiner, the operating profit as measured by the difference between refined product prices and crude oil feedstock costs.

Market maker
In the oil market context, an energy trader or energy trading firm which is prepared to buy and sell in the cash or derivatives market to provide a two-sided (bid-ask) market and greater liquidity.

Marker crude
A widely traded crude oil that is used as a reference point for setting the prices of other crude oil grades (See Benchmark crude).

Marpol
International Convention for the Prevention of Pollution from Ships, the main international convention governing the prevention of marine pollution from accidental or operational causes. First established in 1973, it was extended in 1978 to incorporate regulations governing tanker design and operation. It is administered by the International Maritime Organization.

Metals content
A measure of the content of nickel, vanadium, iron or other metals. High metals content can affect the fuel burning or upgrading characteristics of a crude oil or residue.

Middle distillates
Oil products in the boiling range between 160°-360°C -- i.e., between gasoline and heavy fuel oil. These include gas oil, diesel and jet fuel (kerosene).

N

Naphtha
One of the lightest cuts of the atmospheric distillation process that is vaporized at a temperature range of 5°-165°C. Naphtha can be used as a feedstock for both gasoline manufacturing and petrochemicals depending on its quality, with light or paraffinic naphtha usually used in petrochemical plants and heavy or N+A naphtha usually used in reformers at refineries to make gasoline.

Natural gas
Naturally occurring hydrocarbon gas that is predominantly methane and is produced both in conjunction with crude oil or separately. The methane, or dry gas, can occur with varying amounts of natural gas liquids, mainly ethane, pentane and liquefied petroleum gas, as well as condensates. These liquids are typically stripped from the methane as part of the production process. While methane is a highly desirable fuel, natural gas liquids can also be used as feedstocks for petrochemicals and other refining processes, as well as for fuels.

Natural gas liquids (NGLs)
The slightly heavier hydrocarbons produced with natural gas such as ethane, propane, butane and pentane, or natural gasoline. These hydrocarbons are usually liquid or can be easily turned into liquids under moderate pressure. They can be used both as fuels and feedstocks. Liquefied Petroleum Gas is one of the main categories of NGLs.

Netback
A calculation of the value obtained from the processing of a crude oil. It is derived from the yield of the refined products, prevailing refined product prices and crude oil processing and transportation costs. It allows the comparison of the value of a crude oil to a refiner with the market price for the crude oil.

New York Mercantile Exchange (Nymex)
Futures market trading light crude oil (West Texas Intermediate), unleaded gasoline, heating oil, propane, natural gas and options. See www.nymex.com.

O

Octane rating
A quality specification for gasoline that measures its tendency to ignite spontaneously, creating engine knock and causing the engine to operate less efficiently. Two basic rating systems exist: the research octane number, or RON, and the motor octane number, or MON. In both cases a higher number means better quality. Lead has traditionally been used as a low-cost additive to raise the octane number of gasoline, but it has been banned in many countries for health reasons, requiring the use of other high-octane additives.

Oil sands
A hydrocarbon reservoir containing liquid hydrocarbons bound together with sedimentary sands. The synthetic crude is extracted either by heating the source rock, allowing the liquid to rise to the surface, or the oil sands are first extracted and the syncrude separated from the rock by heating. Also known as tar sands.

Option
A derivative instrument that provides the right to buy or sell a commodity at a given price sometime in the future. The buyer then can choose whether or not to exercise the option depending on market conditions and investment strategy.

Organization of Petroleum Exporting Countries (Opec)
Founded in 1960 by countries seeking to exert greater control over oil production and sales, hitherto dominated by major oil companies. Members in 2007 are: Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. See www.opec.org.

Over-the-counter (OTC) instrument
A derivative or other financial instrument that is customized for the individual buyer as opposed to being traded on a uniform basis in an organized exchange, such as a futures market.

P

Panamax
Vessels of between 60,000 and 80,000 deadweight tonnage. The maximum size capable of passing through the Panama Canal fully loaded.

Paper barrels
A generic term for oil that is bought and sold in forward or futures markets; thus, it involves commitments to make future deliveries rather than exchange of actual physical supplies (See wet barrels).

Paraffinic naphtha
Naphtha with a high paraffinic content suitable for petrochemical use as an ethylene cracker feedstock.

Pour point
The temperature at which a crude oil or refined product such as residual fuel flows. Some crude oil grades and residual fuels must be heated in order to remain liquid, which is expressed as a high pour point, meaning that they can be difficult to handle and may require heated storage or tankers.

Prompt month
The first month forward for which a futures contract is being traded. Also known as the front-month.

Proved reserves
The estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made.

R

Reformer, reforming
In refining this usually refers to the process of catalytic reforming in a reformer unit, which uses heat and pressure in the presence of catalysts to convert naphtha feedstock into higher-octane gasoline blending components or reformate. This is done mainly by converting lower-octane naphthenes into higher-octane aromatics.

Reid vapor pressure (RVP)
A measure of the volatility of petroleum products that is done by testing vapor pressure at 100°F in pounds per square inch.

Reserve replacement ratio (RRR)
For a given year, gross additions to proven reserves divided by production during the year.

Reservoir
A porous and permeable formation containing significant quantities of hydrocarbons. A reservoir is characterized by a single natural pressure system.

Residual/residual fuel/residue
Alternative names for fuel oil -- high-sulfur fuel oil (HSFO), low-sulfur fuel oil (LSFO) and low-sulfur waxy residue (LSWR).

S

Seismograph survey
A survey of an area by means of an instrument that records the vibrations of the earth. By recording the time interval between the source of the shock wave and the reflected or refracted shock waves from various formations, geophysicists are able to define the underground configurations.

Shale oil
Shale is one of three sources of synthetic crude -- where liquid hydrocarbons are bound with solid nonhydrocarbon minerals. The others are tar sands and bitumen.

Sour crude
Usually a crude oil that has sulfur content that is greater than 0.5%. This higher sulfur content affects the quality of the resulting refined products and sometimes means extra processing is required. It is referred to as sour because of the unpleasant smell of the sulfur.

Spot market
A market for immediately available single cargoes or other small lots of physical crude oil or refined petroleum products.

Spread
A relationship between two prices, either for the same grade of oil at different time periods or for different grades of oil. These price relationships lie at the heart of much current oil trading since they tend to be less volatile than absolute movements in prices. Spreads also define the relative trends of prices between different markets and over time (See Backwardation and Contango).

Straight-run
A term used to describe any refined product that emerges from the initial refinery distillation of crude oil.

Straight-run gas oil
A middle distillate that is produced from refinery distillation at temperatures usually ranging from 200°-350°C. It usually is used for heating oil or diesel fuel.

Straight-run residual oil or residue
The remaining portion of the crude oil feedstock that does not vaporize in the refinery distillation process. This product can be used directly as a boiler fuel, or it can be used as feedstock for vacuum distillation units.

Suezmax
Vessels in the order of 120,000-200,000 deadweight tonnage, typically vessels with load capacities of 1 million barrels of crude oil. The maximum size capable of passing through the Suez Canal fully loaded.

Sulfur content
A measure of the presence of sulfur in crude oil, which is a key determinant of quality. Sulfur content is measured as the percent of sulfur by weight in the crude oil. Crude oil grades that are high in sulfur are referred to as sour crudes, and those that are low in sulfur are referred to as sweet crudes.

Swap
A financial risk-management tool in which two parties exchange differing market risk exposures in order to be assured of a fixed or predictable price, usually for an extended period of years. It may also involve short-term instruments in which risk is managed by the swaps provider rather than absorbed by a counterpart.

Sweet crude
Usually a crude oil that has a sulfur content that is 0.5% or less by weight. Lower sulfur content improves the quality of the resulting refined products, and sweet crudes do not require as much processing as sour crudes. They are referred to as sweet because of the absence of an unpleasant sulfur smell.

Swing producer
A company or country that changes its crude oil output to meet fluctuations in market demand. Saudi Arabia, as it has traditionally presided over the world's largest spare capacity, is seen as the world's major swing producer.

T

Tar Sands
See Oil sands.

Term contract
A sales contract that specifies set price terms for the purchase of several cargoes of oil over a particular period in contrast to a spot transaction, which involves only a single cargo. Pricing, volume and timing can all be quite flexible, with the essence being a continuing, regularized commercial relationship.

Terminal
An onshore transit facility that receives and stores crude oil and products from production facilities via pipeline and/or tankers.

Total acid number (TAN)
Expressed in milligrams of potassium hydroxide, the TAN reflects the number needed to neutralize the acid in one gram of oil. The TAN is an especially important barometer for refiners, as the higher the number the more corrosive the crude can be and thus the more difficult and more expensive it is to handle.

Transparency
In relation to a market, this refers to the tendency for price signals and other market information to be easily visible to all participants and for market pressures to be quickly reflected in price levels.

U

Ullage
The unoccupied space in a storage tank that is still available for use.

V

Vacuum distillation
A secondary refining process in which straight-run residue is distilled in a vacuum in order to separate more light hydrocarbons than through atmospheric distillation. The output of the process is vacuum gas oil, which can be used as feedstock for cracking units, and vacuum bottoms or residue, which are usually used as boiler fuel.

Vacuum gas oil (VGO)
The lighter product manufactured from the secondary refining process known as vacuum distillation. Vacuum gas oil is a preferred feedstock for cracking units to produce gasoline and gas oil.

Viscosity
A measure of the ability of a liquid such as crude oil to flow. Viscosity is measured at a wide range of temperatures according to several different scales. The main scales are Kinematic, Redwood, Engler and Saybolt. This is a critical characteristic of crude oil and residual fuel because it affects its handling.

VLCC (very large crude carrier)
A class of tanker with deadweight tonnage, or carrying capacity, of 200,000 tons or more. This is the usual size of tanker used to carry Mideast and other grades on long-haul voyages. Some ports and key canals such as Panama and Suez cannot handle these ships when fully laden.

W

Wax
A solid or semisolid material consisting of a mixture of hydrocarbons obtained or derived from petroleum fractions, or through a Fischer-Tropsch type process, in which the straight-chained paraffin series predominates. This includes all marketable wax, whether crude or refined, with a congealing point between 100° and 200°F and a maximum oil content of 50% weight.

Wellbore
The hole drilled by the bit that is equipped for oil or gas production on a completed well. Also called Well or Borehole.

West Texas Intermediate market
The US spot crude oil market for West Texas Intermediate crude, which provides the foundation for the actively traded Nymex light, sweet crude futures contract. The main delivery points for spot trading are Cushing, Oklahoma, the base for the Nymex crude contract, and Midland, Texas.

Wet barrels
A term that distinguishes the trading of physical oil supplies from the forward or futures transactions. Spot markets typically involve "wet barrel" transactions that result in the delivery of oil.

Wildcat
An exploration well that is drilled to an unproven reservoir from which no oil or gas has been produced in the nearby area. A "rank" wildcat is drilled in an area distant from previous drilling.

Workover
The performance of one or more of a variety of remedial operations on a producing oil well to try to increase production.