The oil market

All we often hear the phrase "the price of oil." His day-to-day repeated on television, in newspapers and on the radio, making predictions and demonstrating graphics. However, it is this phrase gives food for errors, since a single "price of oil" does not exist. As the price of any other commodity, it is adjusted in line with the basic economic law - the law of supply and demand. At the same time, this figure will vary depending on the place of origin and quality of oil, as well as the market in which it is sold.

Oil grades vary greatly in quality and composition, and these characteristics are largely dependent on the place of origin of raw materials. The main parameters of the quality of oil - is the density and sulfur content. Experts identify the light, medium and heavy grades. Usually considered more valuable light because of them you can get more light products such as gasoline. Each grade has its own name, often very beautiful. For example, there are Arab oil brand Dubai crude (from the name suggests, it is produced in the United Arab Emirates), the British North Sea Brent crude oil and oil from Venezuela with the romantic name Santa-Barbara.



Unfortunately, such an abundance of different varieties of oil complicates the analysis of the market. In order to facilitate this, experts consider the price of those varieties which are considered the most typical of the individual processing centers. These varieties are called "standard". For example, Europe is the reference grade Brent, produced in the North Sea. He's seen as a benchmark in North America, along with the "average WTI» (West Texas Intermediate crude) and "severoalyaskinskoy» (Alaskan North crude) oils.

Long time inside of Petroleum Exporting Countries (OPEC) as a pricing benchmark used light Arabian crude. Recently, however, to analyze the state of the market, these countries use a "basket" of seven types of oil. They are a light crude oil from Saudi Arabia (Saudi Arabian Light crude), Dubai (Dubai crude) of the UAE, the Nigerian light grades Bonny (Nigerian Bonny Light crude), Saharan blend (Saharan Blend) from Algeria, Indonesian Minas, Venezuelan Tia Juana and Mexican Isthmus.


As for Russian oil, to export it goes under four brands: Urals, Siberian Light, REBCO and Sokol. Urals - a mixture of mild West Siberian oil and Siberian Light sour crude Urals and the Volga, comes through Novorossiysk pipeline system and "Friendship". Siberian Light supply port of Tuapse. Sokol - the oil produced in the project "Sakhalin-2", is exported through the port of De Castries (Khabarovsk Territory). REBCO - Russian Export Blend Crude Oil (Russian Export Blend Crude Oil) - brand used in exports through the port of Primorsk.

Up to 70 years of XX century, oil prices were relatively stable because of the high degree of monopolization of the industry. The market was dominated by long-term contracts that are fully staged and buyers and sellers in a situation where for a long period of time, the prices remain at the same level. However, such a pricing structure proved to be unsustainable when the global oil crisis of the 1970s, prices began to rapidly change. The liberalization of the oil market only started in the 80s of last century. Once in 1983, on the New York Mercantile Exchange (New York Mercantile Exchange - NYMEX) began trading futures contracts for crude oil. Futures contract (futures) - an agreement for the supply of a standard quantity of a particular commodity at a specified time in the future at a price fixed today. Rules of the Exchange, which trades futures, size "portions" of the goods and its quality requirements. These conditions are known in advance to all market players, which greatly simplifies the trade. Thus, bidders today does not necessarily bring samples of oil they sell. Daily on world markets to enter into transactions for thousands and thousands of such contracts. And in fact, it turns out that the same barrel of oil can move from one vendor to another many times, bringing them profit or loss, depending on which way the price swings.

Today, these prices are set in international markets - places where demand meets supply. As with other natural resources and agricultural products, crude oil traded on commodity exchanges, the largest of which - is the New York Mercantile Exchange NYMEX and the International Petroleum Exchange in London IPE. In addition to them, rather large volumes of oil sold on the stock exchanges in Singapore, Japan and Venezuela.

To trace the evolution of prices for oil experts use multiple sources of information. One of them - the market newsletters. Probably the most common among them are a series of Platt's papers on financial markets and the level of prices published by a group of McGraw-Hill, Weekly Petroleum Intelligence Weekly data and information agency Petroleum Argus.







Also one of the most reliable sources of information on the state of the world oil market is considered Monthly Oil Market Report («Monthly Oil Market"), which contains detailed information on oil production, supply and volume of stocks around the world. The review published by the International Energy Agency (International Energy Agency, IEA), brings together 21 European countries, USA, Canada, Japan, South Korea, Australia and New Zealand.

Interesting Facts

Prior to 1970, the price of a barrel of oil on the world market does not exceed $ 3. After the announcement of the embargo on Arab oil exports in 1973, the price jumped by 4 times and passed for 12 dollars.

By 1981, during the Iran-Iraq crisis, the price has risen from 14 to 35 dollars.

"Sweet" crude oil is more expensive than "sour." "Sweet," the called the oil with low sulfur content and, therefore, does not require additional processing. It acquired its name in the late XIX century, when determining the quality of oil it tasted.

On the New York Mercantile Exchange (NYMEX) crude oil quotes indicate in dollars per barrel, and the oil - in cents per gallon.

Today at the London International Petroleum Exchange (IPE) in a day is an average of about 70 thousand futures contracts on the mixture Brent, which is equivalent to the global daily production of crude oil, and on the New York Mercantile Exchange NYMEX - 150 thousand futures contracts mixture Light Sweet.

Physical delivery of oil exchange contracts is very rare and accounts for only about 1% of the total trading volume.