Topic: Oil Spot Price?!

We all hear the SPOT price of crude oil being reported by the media, but no one seems to know how this price is arrived at?

Buyers and sellers of crude oil must interact somehow somewhere in order for the SPOT price (bid/offer) of crude oil to be arrived at. Where and how is that done?

I have asked the Energy Information Administration out in Washington, DC. they said they just report whatever price the media (Reuters, Bloomberg) gives them, but how the media arrives at that price they do not know?

Re: Oil Spot Price?!

Hi cigarno,

Many thanks for your message and question. Please spend a short while reading our FAQs page which will answer your question on how crude oil is traded on the market. Link is here: http://www.liveoilprices.co.uk/faqs.html

Regards

LiveOilPrices

Re: Oil Spot Price?!

Hello Live oil.
  My question was with regard to SPOT oil prices and the link you provided is about FUTURES contracts.
Unless you consider  oil futures contracts price to be EXACTLY equal to the oil spot price, then the link does not answer my question?
Best Regards

Re: Oil Spot Price?!

Hi Cigarno,

Light oil is traded on the New York Mercantile Exchange (NYMEX) in the USA. Brent oil is traded on the ICE Futures exchange in the UK. These two trading exchanges are how crude oil is traded in the market.

Regarding your question for "spot price of oil" - It does not make sense as it does not referr to either trading exchange NYMEX or ICE. We can only assume that spot price relates to the EIA making some sort of oil price calculation themselves and then calling it a spot price. Further information, please see here: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm

Also, see notes at foot of page: "Weekly, monthly, and annual prices are calculated by EIA from daily data by taking an unweighted average of the daily closing spot prices for a given product over the specified time period."

Hence we guess that oil spot prices are in fact calculated by the EIA. I hope that answers your question.

Regards,

LiveOilPrices

Re: Oil Spot Price?!

Hello,
  I would like to thank for taking the time to answer my question. Unfortunately, however, it still does not answer my question.
Two points to be made:
(1)-  The foot notes you refer to, says that the weekly and monthly price are calculated by taking the unweighted average of the daily spot price. But how the spot price is calculated or arrived at there is no mention of that???
(2)- you said that we can assume it is the EIA that does the calculation for the spot price. Well let us say that is correct, how is that is calculation done what are the mechanics of such calculation? that is the question??

6 Reply by DarrenGerr

  • DarrenGerr
  • Guest

Re: Oil Spot Price?!

Whats an oil spot price?

Re: Oil Spot Price?!

rollthe mystery continues......!!!!!!
hope someone can solve the riddle????!!!

Re: Oil Spot Price?!

Anyone else have a view on this subject? Maybe you need to ask the EIA directly?

Re: Oil Spot Price?!

I already wrote to the EIA and guess what, They also  do not how the spot price is arrived at and all they do is they report whatever price the "media" gives them...........!!!!!!!

No What???!!!!

Re: Oil Spot Price?!

Hey cigarno,

Found this interesting article in the NY Times: http://krugman.blogs.nytimes.com/2009/0 … ent-197273

Check the comments, this one is interesting:

"I don’t know what Mr. Krugman means by speculation. If the future oil price is selling above todays spot you can buy oil today and simultaneously sell a forward contract to deliver it at a specified time in the future. Your costs are the cost of the oil today, storage cost, and the cost of lost interest by having your money tied up in oil. Your revenue comes when you sell the oil at the agreed upon price in the future. Since all the all the costs are know up front I don’t know where the speculation comes in. You do the deal if the revenue received in the future is higher then the cost of carrying the oil and the opportunity cost of tied up capital.

The end result is just a marinal tinkering with the delivery time for the oil based on the forward price. This never did explain why prices stayed high for over a year. Perphaps a better explanation for the volatility is that the oil price is being driven by a cartel that cut 2 mb/d and that low prices discourage new investment and the extra effort required to produce high cost oil." roll

Re: Oil Spot Price?!

The question remains: :]How is the spot oil price arrived at provided that spot oil is not traded at an exchange?!
It has nothing to do with speculations or futures contracts but rather a simple question that nobody seems to have answer to?!

Re: Oil Spot Price?!

What has this to do with my question?
The question again:
Buyers and sellers of crude oil must interact somehow somewhere in order for the SPOT price (bid/offer) of crude oil to be arrived at. Where and how is that done?

  • Rory
  • New member
  • Offline

Re: Oil Spot Price?!

The price of petroleum as quoted in news generally refers to the spot price of either WTI/Light Crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, Oklahoma, or of Brent as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange has been incorporated) for delivery at Sullom Voe. The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API and its sulphur content, and its location. The vast majority of oil is not traded on an exchange but on an over-the-counter basis.[citation needed] Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration (EIA) uses the imported refiner acquisition cost, the weighted average cost of all oil imported into the US, as its "world oil price".

See: http://en.wikipedia.org/wiki/Price_of_petroleum

Re: Oil Spot Price?!

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Re: Oil Spot Price?!

Depending on the item being traded, spot prices can indicate market expectations of future price movements in different ways. For a security or non-perishable commodity, the spot price reflects market expectations of future price movements. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security, according to the cost of carry model. So that they just report some resources of price in the media gives them, some arrived price they do not know and if you want to have the most popular and widely watched futures markets about crude oil maybe you can try this website
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Re: Oil Spot Price?!

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