Deliverable Grades

Deliverable grades, are the grades of a commodity that have been approved by a futures exchange as deliverable in the settlement of a futures contract. Also known as basis grades, they are used to standardize futures contracts. 

Deliverable grades specify the minimum purity or quality of the commodity in the futures contract, ensuring both buyer and seller agree on precisely what is to be delivered - which is why they are also known as contract grades. 

Physical commodities often trade at a premium or discount to the standard futures contract price, depending on their quality and their location.

There are many different grades for every commodity, and they vary from exchange to exchange. For example, in the case of crude oil, different crude contracts trade on different exchanges.  Brent nd West Texas Intermediate have become international benchmarks. Brent is traded on ICE Futures Europe, while WTI contracts are sold chiefly on the New York Mercantile Exchange, or NYMEX. 

For more oil types, read Understanding Benchmark Oils.