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Black gold-oil

Oil also called black gold; the reference oil has different names in different regions. The most popular are traded in Europe, in the oil standard is London Brent (North Sea Gross), the United States has negotiated oil WTI (West Texas Intermediate) and the Middle East with Arabian Light. Raw energy at the heart of global interests in the early 20th century, oil became coveted and suffered several historical shocks known as the oil shocks. The supply and demand govern the price of oil in physical market but there are also futures contracts for the actors to cover a price change or speculate bringing to market operators to diversify their portfolio.

The evolution of oil prices

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The attraction for oil in the 1920s has increased the importance of the mastery of prices for multinationals.

But since the 1960s, the Organization of Petroleum Exporting Countries called OPEC regulates oil prices to counter these multinationals. This group alone accounts for 40% of global production and thus can agree on an offer price.

The futures market and the development of trade limited this trend in 1986 causing a “shock against oil.” It was then agreed between Saudi Arabia and the United States together to increase the production to the West. The prices of all exporters are then collapsed notably the Soviet Union was originally heavily dependent on its oil exports.

But it was in 1973 and 1979 that took place the first oil crises for political reasons respectively the Yom Kippur War and the revolution in Iran.

Oil prices of stock

Oil prices are changing 24/24 and represent the price of a barrel is equivalent to 158.9873 liters or 42 US gallons*.

The unit of measurement of oil stocks is the “blue barrels” (which comes from the bright color of the barrel) millions (Mbbls) or billion (Gbbls) per day.

Oil can be negotiated by the “spot” market for physical deliveries. The players in this market are mainly oil companies and refiners. These players can also trade in the market “Forward”, or physical futures market, to benefit from a fixed price in advance at a later date. This then allows market traders to have a guaranteed price but less used to the benefit of futures.

Futures contracts for oil are traded worldwide mainly via the ICE (Intercontinental Exchange) which is traded in dollars for Brent to Sullom Voe delivery and NYMEX (New York Mercantile Exchange) on which exchange dollar WTI for delivery in Cushing, Oklahoma. The other financial markets are electronic platforms that only retransmit the information from these two major markets.

Unlike contracts “Forwards”, futures contracts do not result in a physical transaction. It is this market that the actors in the oil markets can be covered with a price change. The development of contracts on the price of oil also allows investors to place in order to diversify their portfolio and that some may call speculation.

This topic is subject to different opinions among stakeholders erratic effect on macroeconomic news that may cause significant volatility in prices and others who feel the intervention of these investors to the market more fluid, called the liquidity and allow petroleum industry to find a counterpart immediately.

Each contract represents 1,000 barrels of oil or 42000 gallons*. Thus, the change in the oil price of one cent of a dollar equals a variation of 10 dollars per contract.

*how much pound in a gallon:

Oil, petroleum

Specific Gravity 0.88

1 gallon weighs 7.344; 7000 gallons would weigh

7000 * 7.344 = 51,408 pounds

Updated: November 25, 2016 — 12:14 am

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