Oil market

This article of synthesis describes the oil Marché .

Gross products

Without going into technical and tax considerations detailed, one can distinguish the source from the crudes between:

gross of participation, rough returning in the country host which can reassign it in whole or part with the dealer at a price known as of buy-back
gross of concession being allocated to the dealer whose price takes into account the royalty ( royalty ), the amount of the taxation and of course the loads of production (still called technical costs).

Quotation

The international business of crude oil, like that of the intermediate oil products and that of the end products, is centralized on two markets, which are located at New York with NYMEX and at London with ICE. There exist other places, but they do nothing but relay via Internet these two markets.

The quotation of the various crudes is done the every day 24:00 /24 and the majority of the tankers are subscribed in the pages emitted by the agency Reuters which provides this quotation. In Europe the traders negotiate the morning with Asia and, after the opening of the market of New York, with the the United States late in the evening until around 11 hours of the evening. The system of transaction is comparable with those of the financial markets.

This quotation leans on crudes of references like the light Arab ( Arabian Light ), WTI (West Texas Intermediate) or the Brent (gross of the North Sea).

Indeed, the valorization of a given quantity of crude, in general 1 metric ton, takes account of the price FOB of this crude plus the transport costs (freight), the insurance, the incidences of losses, the expenses of refining and a certain profit margin for the refiner. Also there is always a correlation between the price of the end products and the price “FOB” of a crude.

This valorization is done by average daily data processing interposed, in order to from day to day know the commercial value of each quality of crude on the market.

As in the stock exchange, the transactions between traders are done by telephone or interposed Internet and confirmed by fax or email.

As for the financial markets, there exists also a futures market . On this market, the crude is sold or bought by batch, with one or several months of delivery in advance. It is the same for the intermediate products like naphtha or the kerosene, or for the end products like the fuels, the “jet fuel”, the gas oil or heavy fuel.

In a word all that comes from an crude oil is saleable , and sold, including the residues.

Amounts concerned

The financial aspect of this trade is enormous and amounts per billion (or tens of billion) of dollars per day. Imagine that only one light Arab cargo of 280.000 tons (2 Mbbls) can be worth up to 150 million dollars and the traders of the whole world treat hundreds of cargoes per day.

The cost price of a crude barrel, at least for the crudes extracted since the ground (gross onshore), is very cheap, about 2,50 US$/baril (1 barrel = approximately 159 liters, exactly 158,984 liters), this by counting very broad the costs of search and extraction for this crude.

In May 2006, the courses from 70 to 75$ got a profit margin, at least for the owner of the layer and the State host, considerable; from where amazing economic issues, therefore political enormous. The international conflicts in order to have the seizure on energy resources (and thus of the very comfortable profits) are currency.

The crude and the products can be sold FOB (Free One Board) or CIF (Cost, Insurance and Freight). In the first case it is the purchaser who pays the loads after purchase (loads corresponding to the freighting of the ship, the freight and the insurance of the cargo) and in the second case it is the salesman who very regulated before the sale. Obviously the price is less low in the first case than in the second.

Variations of quality

Generally, any transaction of crude or product requires the knowledge of this crude or this product. Also the salesman, when he is the first owner of the crude provides to the purchaser a more or less detailed analysis of the physicochemical characteristics of the crude or product. According to the case and the number of characteristics requested from the analysis laboratory, such an analysis can cost between 200.000 and 250.000 € or more, but this expenditure is only one water drop considering the derived profits (see further the characteristic of a crude analysis simplified).

As it was known as in the article on the production, the stability of a fair average quality is essential in order to obtain a constant and regular commercial value; also the producer of the crude thoroughly controls the flow of each productive well (or each layer) in order to respect this constancy of quality. This regulation is done by computer.

Indeed as considering previously, a layer can extend on hundreds from square kilometers and several layers can be close from/to each other and even require the drilling of several tens of the hundreds of different productive wells to various depths. The flow, the collection and the mixture of all these affluents require a very thorough regulation which is done in general by interposed electronics and automatisms.

End products

For a tanker refiner, the trade of the crudes and end products have several objectives:

first of all to ensure the provisioning of crude and loads its own refineries,
to run out on the market its own surpluses of production out of crude and products,
to exchange with the fellow-members the crudes and the products in order to avoid useless transport.

It results from it from these objectives a constant search for occasions of transactions in order to satisfy its own needs as well as possible and to if possible benefit in supplement some comfortable.

As he was said, between producer, intermediary and ultimate consumer, there exists an international market of transactions and exchanges as well out of crude as in end products. In general, the oil companies establish with the producing countries and/or companies of the agreements of purchases to more or less long run (see higher). Nevertheless, a good part of produced oil is sold on the open market, and according to the supply and of the moment.

To sell oil, if this oil is well-known, it is carried out periodic analyzes made by the oil companies; if this oil has just been discovered and exploited, it is the producer who provides the analysis which is still an oil company Opérateur layer.

In the price relativity of crudes, the price of a crude depends, mainly, of the chemical and physical characteristics of this one. Thus a rough HTS has a price lower than a rough BTS, a naphtenic crude is more expensive because this crude goes, after reforming, gives many aromatic products to high octane number, being used as bases with the manufacture of the gases regular and super. If the kerosene fraction of the crude is abundant and it has a very low freezing point, for example -54°C, this crude is more expensive because the kerosene is used as a basis for manufacture of the Jet A1, carburizing for the planes. Obviously the proximity of the places of consumption also influences the price because the transport costs are less without speaking about other economic and/or political criteria.

Fluctuation in prices

Just like the actions, there are a purse of oil and end products, one can buy them “spot” or in the long term with delivery with 1,2, 3… 6 months. It is necessary to also announce that oil can be sold or bought FOB to Free One Board or CIF Cost, Insurance and Freight like the other food products. The market prices are published daily by the specialized newspaper: the Platt' S Oil Gramm . As it was known as higher, an oil cargo can be bought and sold on several occasions between the moment when oil is charged with the terminal with loading and that where it is discharged with the consumer country. These transactions are the fact either of the traders of the oil companies, or of the independent brokers, or of both. Sometimes, in one day it is enough to buy and sell three or four cargoes to have a comfortable benefit.

For the oil companies, it is important to as know close as possible the value of an oil of a quality given to a given moment. With this intention, using computer programs, one carries out a Valorisation spot, i.e. one determines the value of this quality of oil with the prices of the end products of the moment. Indeed, knowing quality of oil, and according to a certain structure of determined refining, one can evaluate the quantity of propane/butane, gasolines, of Jet A1, driving gas oil and domestic fuel which one can produce, and thus the price of this oil (taking into account its cost of refining and transport, strokes, etc).

The oil price very often varies, due to various factors, daily production in surplus or in deficit, political crisis in an unspecified country, bad weather, terrorism, war, etc It is enough that one season is colder or more heat in the United States or in Europe so that the price of the domestic fuel increases or decreases by ten percent and per rebound the oil price itself.

There is also another problem which varies the oil price: it is the Réserve in the event of war. Indeed, in the majority of the countries, the law requires that the companies of refining have an crude oil reserve or its equivalent in end products representing, with the low word, three months of national consumption. This to prevent, in the event of war, that the army is with fuel court. Thus the oil price fluctuates with the liking of the rise or the fall of the reserves ( Strategic reserve of oil ) with the United States.

Statistical data

21e century

In barrel million per day.

The oil courses knew a very big rise of 2002 to the summer 2006, under the effect of a not anticipated strong demand coming in particular from China. This rise is also explained by various factors as geopolitical concerns (drops production in Iraq, tensions political in the Middle East, in Nigeria, disorganization momentary in Venezuela…), of the industrial damage (Gulf of Mexico following the passage of Katrina…), these variations being amplified by the speculation.

The sharp decline observed with autumn 2006 is explained by late integration by the markets of a resumption of the production, a stabilization of consumption and a reversal of anticipations. The resumption of the production was stimulated by the high courses which involved an acceleration of the investments. including producing small countries. Consumption has progression less than envisaged by the market because of better energetic efficiencies as well in countries OECD as in China (in particular under the effect of the high courses), of the diversification of energies (begun again coal consumption, developments of renewable energies), efforts of control (purchase of machines and more sparing objects, more reasoned use of those). Lastly, a soft climate accelerated the reversal of the market (and the speculation) justified by its fundamental and a geopolitical context causing less concerns.

See too

Notes and sources

Random links: