Mastering the Commodities Markets

Oil Pricing and Price Discovery

As mentioned previously, the various prices of crude oil and oil products are set on the international exchanges. This effectively sets what is known as the ‘flat price’.

Physical barrels of products or crude can be traded on a fixed price basis, but are typically traded and priced off a series of price quotes established during a date range relevant to the time of loading or delivery. The actual price quotations that are used are defined at the time of the physical or paper (such as swaps) transaction. The most widely used current publication for setting oil prices is Platt’s (now owned by Standard & Poor’s) which uses a variety of ‘mean of close’ (MOC) methods in the main oil hubs of Singapore, London and New ...