Anyone who sees the Brent quote on the news might assume it is the price of any barrel. It is not. Brent, WTI and Dubai are benchmarks: specific grades, traded in large volumes, that serve as a yardstick for the hundreds of other grades produced around the world.
Each grade is sold at a differential to its benchmark — a premium or a discount in dollars per barrel. What sets that differential is, first of all, quality. Lighter crudes, with a higher API gravity, and sweeter ones, with less sulphur, yield more high-value products and cost less to refine; they tend to trade at a premium. Heavy, sour crudes tend towards a discount.
Logistics is the second part of the differential. A grade loaded far from the major refining centres carries the cost of freight to them. That is why the same quality can be worth different amounts depending on the loading port and destination — and why the delivery basis, FOB or CIF, changes the number being negotiated.
The final price of a cargo is rarely fixed on the day of the contract. The usual approach is a formula: the average of the benchmark over a period around the bill of lading date, plus the agreed differential. This spreads the risk of price movements during the loading window between the parties.
For a buyer, the right question when faced with an offer is not “what is the price?”, but “which grade, which benchmark, which differential and which basis?”. An offer that answers all four can be assessed. An offer with a fixed price far below the market and no grade named is answering a different question — and not the one a refinery cares about.