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Quality Differential

Price adjustment reflecting differences in commodity specifications such as sulfur content, gravity, or purity.

Quality differential is the price adjustment reflecting the difference between actual product quality and the reference benchmark.

In oil trading, differentials account for sulfur content, viscosity, or other characteristics affecting refining value. Positive differentials indicate superior quality; negative differentials indicate inferior grades.

Traders use differentials to evaluate netback pricing, negotiate cargo terms, and manage hedges.

Quality differentials ensure fair valuation and support informed trading decisions.

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