What is the price of oil? Let’s try to answer this seemingly simple question. The fact is that crude oil comes from various fields in many countries. In addition, crude oil is traded in several ways. Read in this article why the answer is not as simple as it seems.
Where does the oil come from?
Crude oil comes in various grades, and each grade has different characteristics, such as API gravity, sulfur content, and viscosity. The quality of crude oil can affect its price.
Light sweet crude oil with low sulfur content is generally considered of higher quality and tends to command a premium over heavier sour crude with higher sulfur content.
These are the prices of some Texas bends of crude oil.
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Where is the oil delivered?
Crude oil prices can vary based on the location of the oil and the associated transportation costs. Landlocked regions or areas with limited transportation infrastructure may have higher transportation costs, impacting the final price.
Additionally, proximity to refineries and major demand centers can also influence prices. These are the prices of some Iranian blends delivered to different locations.
What is the price of oil? When?
If you think we have considered all the factors, we have not. The price of oil depends not only on its quality and cost of delivery but also on the timing. Trading crude oil futures contracts is one of the most popular ways to participate in the oil market.
At the same time, all contracts have different expiration dates. Accordingly, contract prices also differ. Do we want to know the estimated price of oil in a month or two months? These are different prices.
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Do you see now that “What is the price of oil?” is a very vague question? It requires a lot of clarification to answer.
