Grade / Quality Spec
The standardized quality specifications a commodity must meet to be deliverable against a futures contract — API gravity and sulphur content for crude oil, purity for metals.
Commodity futures contracts specify accepted delivery grades — the minimum quality standards a deliverable lot must meet. This standardization is what makes futures contracts fungible and hedgeable.
For WTI crude: API gravity between 37° and 42°, sulphur content ≤0.42%. Crude failing these specs trades at a discount to the benchmark. For COMEX gold: minimum purity of 99.5% in approved bar sizes from approved refiners.
Grade premiums and discounts reflect real physical market dynamics. Producers of premium-quality crude (low sulphur, light gravity) sell at a premium to WTI; heavy sour crude (Venezuelan, Canadian oil sands) trades at steep discounts.