Benchmark oil trading
Oil prices dropped on Wednesday, snapping a five-session winning streak, as oversupply concerns outweighed optimism over economies reopening. West Texas Intermediate , the U. On Tuesday the contract soared Data from the U.
What is a crude oil benchmark?
When energy analysts and the media discuss the price of crude oil, they are typically referring to one of a small group of specific types of crude oil that are widely and actively bought and sold. The use of such benchmark crudes makes it easier for buyers and sellers to price the variety of crudes that are produced around the world. Other types of crude oil can be compared to these benchmarks by an agreed-upon differential. The agreed-upon differential takes into account a number of factors, including quality characteristics such as API gravity density or sulfur content, transportation costs from production areas to refineries, and regional and global supply and demand conditions, including refinery utilization.
Brent , which is the most widely used global crude oil benchmark, includes four separate light, sweet crude streams that are produced in the North Sea: Brent and Forties produced offshore the United Kingdom as well as Ekofisk and Oseberg produced offshore Norway. In , Brent crude oil loadings averaged 0. Brent is used to price light, sweet crude oil that is produced and traded not only in Europe, the Mediterranean, and Africa, but also in Australia and some countries in Asia.
WTI is used as a benchmark for other types of crude oil produced in the United States, such as Mars, a medium, sour crude produced in the Gulf of Mexico, and Bakken, a light, sweet crude produced in North Dakota. The prices of Dubai and Oman crudes, both of which are medium and sour, are often averaged to create a benchmark that is typically used to price crude oil produced in the Middle East and exported to Asian markets.
As a result, Oman crude oil, which reached 0. For more information, see the October 16 This Week in Petroleum. Add us to your site. Today in Energy. October 28, Benchmarks play an important role in pricing crude oil Source: U.
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The benchmark makes it easier for traders, investors, analysts, and others to determine the prices of multiple grades of crude oil varieties and. Posted: Oct 24,
When energy analysts and the media discuss the price of crude oil, they are typically referring to one of a small group of specific types of crude oil that are widely and actively bought and sold. The use of such benchmark crudes makes it easier for buyers and sellers to price the variety of crudes that are produced around the world. Other types of crude oil can be compared to these benchmarks by an agreed-upon differential. The agreed-upon differential takes into account a number of factors, including quality characteristics such as API gravity density or sulfur content, transportation costs from production areas to refineries, and regional and global supply and demand conditions, including refinery utilization. Brent , which is the most widely used global crude oil benchmark, includes four separate light, sweet crude streams that are produced in the North Sea: Brent and Forties produced offshore the United Kingdom as well as Ekofisk and Oseberg produced offshore Norway.
The benchmark makes it easier for traders, investors, analysts, and others to determine the prices of multiple grades of crude oil varieties and blends.
Camila Domonoske. Above, pump jacks draw crude oil near Long Beach, Calif. The dramatic collapse in worldwide demand for oil led to an extraordinary development on Monday: U.
Free Fall: Oil Prices Go Negative
Also available in. The delivery point is located in Cushing, Oklahoma which is home to 90 million barrels of storage capacity. It is a crucial hub where extensive infrastructure exists and serves as a vibrant trading hub for refiners and suppliers. The rise in importance of the U. The catalyst for this transformation was the sharp rise in U.
Oil drops 2%, snapping five-day winning streak in volatile trading session
Marc Rich, one of the most influential and controversial commodity traders that ever lived, once referred to oil as the blood that flows through the veins of the world. Besides being one of the most actively traded commodities, the price of crude oil is extremely sensitive to geopolitical and weather events. In fact, the world crude oil market is all about investor anticipation of supply and demand, and oil prices are very volatile and highly influenced by consumer and investor sentiment. As such, global events like the mounting threat of the new coronavirus can send shockwaves throughout the market. Over countries have reported laboratory-confirmed cases of COVID , according to the World Health Organization, and the uncertainty about how far the virus may spread has rocked the financial markets and caused ripple effects throughout the economy. When it comes to physical oil, there are different grades. Brent refers to oil that is produced in the Brent oil fields and other sites in the North Sea. Brent crude's price is the benchmark for African, European, and Middle Eastern crude oil. The pricing mechanism for Brent dictates the value of roughly two-thirds of the world's crude oil production. Oil contains sulfur, and the percentage of sulfur in crude oil dictates the amount of processing needed to refine the oil into energy products.
With WTI now firmly reconnected to global energy markets, open interest continues to grow as customers hedge their oil market risk.
A benchmark crude or marker crude is a crude oil that serves as a reference price for buyers and sellers of crude oil. Energy Intelligence Group publishes a handbook which identified major crude streams or blends in its edition. Benchmarks are used because there are many different varieties and grades of crude oil. This is the price that controls world oil market price.
Benchmark (crude oil)
The soon-to-expire May contract for the U. The May contract expires on Tuesday. The one-day plunge is the largest on record going back to , and also the lowest level for a contract on record, according to Dow Jones Market Data. The unprecedented drop in the nearby contract reflects traders scrambling to exit long positions that would require them to take physical delivery of crude amid dwindling storage space. It also reflects a convergence with the physical spot price for oil. Read: Why oil prices just crashed into negative territory — 4 things investors need to know. And they are paying top dollar! The June contract CLM20, WTI contracts for later delivery have traded at much higher prices than the front-month May contracts. The steep upward slope for prices in later months in crude, a condition known as contango , underlines the dearth of storage of crude in recent weeks as the coronavirus wreaks havoc on global demand for oil.
U.S. Energy Information Administration - EIA - Independent Statistics and Analysis
There are different types of crude oil. The most important type of crude oil used in Europe is Brent Crude, named after the North Sea oilfield where it is extracted. Brent Crude is a particularly light crude oil which is carried from the North Sea to the Sullom Voe Terminal on Mainland, Shetland by an underwater pipeline. From there, the crude oil is transported by tanker. Besides its primary role as the most important energy source, crude oil is also an essential raw material for manufacturing plastics. Crude oil is also used in cosmetics and medicines. Because the supply of crude oil is limited but demand is constantly growing, the price of oil is also continuously rising. The US investment bank Goldman Sachs estimates the proportion of crude oil used for primary materials production to be 45 percent.
