Trading and Price Discovery for Crude Oils

This is a book about the international oil market.

Trading and Price Discovery for Crude Oils

This is a book about the international oil market. It takes a historical perspective on how the market emerged, developed, and became what it is today—the biggest commodity market in the world. It is mature and complex, but far from perfect. Throughout most of its 150-year history, the oil market has been monopolised by companies and governments. For only a fraction of that, oil traded in a relatively free market. As a result, we had to live with ‘big oil’, economic shocks, high oil prices, instability and wars. Using a simple concept of market power, this book will explain the meaning of ‘oil price’ and how it is established while offering a valuable lesson for other commodities. Market power is the key to understanding the ‘price of oil’. This book uses a simple concept of price-makers and price-takers to examine the evolution of oil markets, their structure, and prices. The early decades of the oil industry were competitive with low barriers to entry. Barely 25 years later, the Standard Oil company created a refining monopoly, buying oil at its own ‘posted’ price. In the following century, the cartel of major oil companies, helped by their governments, did the same at the international level. OPEC helped producing governments regain control of their own resources, but the organisation was never able to retain a similar level of control. After 1986 price collapse, OPEC abdicated the price-making function in favour of the market. While it never gave up attempts to influence prices, OPEC had to link their official prices to one of the global oil benchmarks. Modern international oil markets function because of oil benchmarks such as Brent, WTI and Dubai. This book showcases: • How oil traders played a prominent role in development of the industry • How policies of consuming nations helped oil cartels • Why and how the US price of oil was negative • How AI has changed the way markets operate and the way in which the markets are likely to change in future This book explores how oil markets grew, functioned, and have occasionally failed to do their job. The ecosystem of derivatives or ‘paper barrels’ trading in far greater volume than physical oil plays a very important role in mitigating risk. With this core tenant, setting the ‘price of oil’ is explained in detail.

Trading and Price Discovery for Crude Oils

Correction to: Trading and Price Discovery for Crude Oils Correction to: A. Imsirovic, Trading and Price Discovery for Crude Oils, https://doi.org/10.1007/978-3-030-71718-6 The original version of this book was inadvertently published ...

Trading and Price Discovery for Crude Oils

This is a book about the international oil market. It takes a historical perspective on how the market emerged, developed, and became what it is today—the biggest commodity market in the world. It is mature and complex, but far from perfect. Throughout most of its 150-year history, the oil market has been monopolised by companies and governments. For only a fraction of that, oil traded in a relatively free market. As a result, we had to live with ‘big oil’, economic shocks, high oil prices, instability and wars. Using a simple concept of market power, this book will explain the meaning of ‘oil price’ and how it is established while offering a valuable lesson for other commodities. Market power is the key to understanding the ‘price of oil’. This book uses a simple concept of price-makers and price-takers to examine the evolution of oil markets, their structure, and prices. The early decades of the oil industry were competitive with low barriers to entry. Barely 25 years later, the Standard Oil company created a refining monopoly, buying oil at its own ‘posted’ price. In the following century, the cartel of major oil companies, helped by their governments, did the same at the international level. OPEC helped producing governments regain control of their own resources, but the organisation was never able to retain a similar level of control. After 1986 price collapse, OPEC abdicated the price-making function in favour of the market. While it never gave up attempts to influence prices, OPEC had to link their official prices to one of the global oil benchmarks. Modern international oil markets function because of oil benchmarks such as Brent, WTI and Dubai. This book showcases: • How oil traders played a prominent role in development of the industry • How policies of consuming nations helped oil cartels • Why and how the US price of oil was negative • How AI has changed the way markets operate and the way in which the markets are likely to change in future This book explores how oil markets grew, functioned, and have occasionally failed to do their job. The ecosystem of derivatives or ‘paper barrels’ trading in far greater volume than physical oil plays a very important role in mitigating risk. With this core tenant, setting the ‘price of oil’ is explained in detail.

Price Discovery in Crude Oil Futures

This study examines price discovery among the two most prominent price benchmarks in the market for crude oil, WTI sweet crude and Brent sweet crude.

Price Discovery in Crude Oil Futures

This study examines price discovery among the two most prominent price benchmarks in the market for crude oil, WTI sweet crude and Brent sweet crude. Using data on the most active futures contracts measured at the one-second frequency, we find that WTI maintains a dominant role in price discovery relative to Brent, with an estimated information share in excess of 80%, over a sample from 2007 through 2012. Our analysis is robust to different decompositions of the sample, over pit-trading sessions and non-pit trading sessions, segmentation of days associated with major economic news releases, and data measured to the millisecond. We find no evidence that the dominant role of WTI in price discovery is diminished by the price spread between Brent that emerged in 2008.

40 Classic Crude Oil Trades

Imsirovic, A.( 2021) Trading and Price Discovery for Crude Oils: Growth and Development of International Oil Markets, London: Palgrave Macmillan. The definitive analysis of the various oil benchmarks, such as Brent, WTI, Oman and Dubai.

40 Classic Crude Oil Trades

The day-to-day world of crude oil traders is not usually open to outsiders. Few non-specialists appreciate how oil traders approach the markets, what their backgrounds are and how they make money. This book brings the oil trading world to vivid life by introducing the reader to 40 real-life trades or strategies that were carried out by named market participants. The 40 chapters cover different geographies and different crude oil markets, providing an unparalleled insight into how crude oil traders work and think. Oil trading developed in its current form in the 1980s and the chapters cover these early beginnings through to the present day. The trades have been grouped in sections that relate to the nature of each trade and its broader use as an example of a successful trading style. Sections cover approaches to arbitrage trading; the impact of geopolitics; logistics and storage plays; short-term versus longer term trading; managing new crude oil grades; trading crude oil derivatives. The book provides plenty of inspiration for current or prospective crude oil traders or analysts. It will also be valuable for academic researchers, business school case studies, and for anyone wanting to learn more about the individuals that shape the world’s most important commodity market.

The Palgrave Handbook of International Energy Economics

... Riboud-Seydoux Part II Economics of Energy Trading and Price Discovery 325 327 18 The Trading and Price Discovery for Crude Oils Adi Imsirovic 359 19 The Trading and Price Discovery of Oil Products Liz Bossley 377 20 The Trading and ...

The Palgrave Handbook of International Energy Economics

This open access handbook is distinguished by its emphasis on international energy, rather than domestic energy policies or international geopolitic aspects. Addressing key topics such as energy production and distribution, renewables and corporate energy structures, alongside global energy trends, regional case studies and emerging areas such as the digitalization of energy and energy transition, this handbook provides a major new contribution to the field of international energy economics. Written by academics, practitioners and policy-makers, this handbook is a valuable and timely addition to the literature on international energy economics. This book was published open access with the support of Eni.

Speculation in the Crude Oil Market

Such price reports would appear to be useless or not worth the cost if the ICE trades did not perform a price discovery function . By generating valuable daily price data to industry participants , trading on ICĚ now performs a price ...

Speculation in the Crude Oil Market


SEC Docket

Furthermore , while most oil flows under contract , its price varies with the spot markets . ... internationally traded foreign crude oils , which makes them a hedging and trading instrument for the international oil industry , and they ...

SEC Docket


Energy Markets

Price Risk Management and Trading Tom James. CONCLUSION There is increasing urgency for a sustainable price-discovery mechanism in Middle East sour crude oil that is liquid, transparent and well regulated. Today, the majority of the ...

Energy Markets

Price Risk Management and Trading. Energy risk management expert, Tom James, does it again. His latestbook is a timely addition to the rapidly developing energy tradingmarkets. This book should be on every energy trader, risk managerand corporate planer's desk. it is an easy read as Tom goes intogreat detail to explain the intricacies of this market and itsvarious unique elements. - Peter C. Fusaro, Chairman, Global ChangeAssociates Inc., Best-selling Author and Energy Expert This sensible and practical guide is essential for those seeking anunderstanding of commerce in energy derivatives. beyond merelyinformative, this hand book for the practitioner details the finerpoints of the use of derivatives as tools for price-riskmanagement. No energy trading desk should be without it. - Ethan L.Cohen, Senior Director, Utility and Energy Technology, UtiliPointInternational Inc. Energy markets are much more volatile than other commodity markets,so risk mitigation is more of a concern. Energy prices, forexample, can be affected by weather, geopo9litical turmoil, changesin tax and legal systems, OPEC decisions, analysis' reports,transportation issues, and supply and demand - to name just a fewfactors. Tom James's book is a practical guide to assessing andmanaging these risks. It is a must-read for senior management aswell as risk and financial professionals.- Don Stowers, Editor, Oil& Gas Financial Journal This book is the most comprehensive on price riskmanagement-centric efforts. It provides the reader with a tangibleexperience of derivatives in today's capital and energy markets.The breadth and scope of the passages are immense, in that bothdeveloped and developing countries' energy markets are consideredand examples applied. Terrific read! - Rashpal Bhatti, MarketingManager, Energy Trading Asia, Enron/BHP Billiton Tom James has simplified the intricacies of a very complex market.In this new market of "hot" commodities, he has been able to give afresh course to those who are new to the energy markets and a solidreview for those that are well seasoned. he covers everythingwithin the oil market from A to Z in this book and does it well.Coming from a financial background myself, it's good to finallyfind a book that can bring a better understanding to the field ofenergy commodities. - Carl Larry, Vice President Citi Energy GlobalCommodities

Price Discovery and Information Linkages in the Emission Allowance and Energy Markets

Having established where price discovery is taking place in the European emission allowance and energy markets, we examine volatility and information linkages between them by employing a rational expectations framework similar to Fleming, ...

Price Discovery and Information Linkages in the Emission Allowance and Energy Markets

We provide the first evidence on the catalysts for price discovery in the European Union Emissions Trading System. Short-run return dynamics are analysed using a regression approach similar to Fleming, Ostdiek and Whaley (1996), while the permanent contribution of securities to long-run price equilibrium is examined by calculating Hasbrouck's (1995) information shares. By employing high frequency data across a wide range of securities, we find that trading costs are a more important determinant of price discovery than the implicit provision of leverage in securities such as futures and options. Securities with low trading costs display greater price discovery than those with high trading costs. We also examine price discovery within the European markets for coal, natural gas and crude oil. Results show that Brent crude oil futures display greater price discovery than a proxy for the physical Brent market, while there is evidence that West Texas Intermediate futures still dominate price discovery globally. In natural gas markets, UK natural gas futures display greater price discovery than physical trading at North-West Europe's main natural gas hubs, though weak links to the crude oil market remain. Due to a lack of liquidity and transparency, it remains difficult to distinguish between coal securities. Overall, our results support the importance of futures contracts as a source of price discovery in contrast with opaque over-the-counter physical trading. Having established where price discovery is taking place in the European emission allowance and energy markets, we examine volatility and information linkages between them by employing a rational expectations framework similar to Fleming, Kirby and Ostdiek (1998). The model specifies volatility linkages operating through common information and information spillover channels. We estimate a representation of this model using GMM for bivariate pairings of emission allowances with coal, natural gas and crude oil. We find that emission allowances are most strongly linked to the crude oil market, in spite of more direct economic relationships with coal and natural gas.

World Crude oil Pricing

Mr. Levin , you also point out in your statement that because of the transparency of NYMEX trading , futures prices use the set prices on the cash market , otherwise known as price discovery function . Does off - market trading affect ...

World Crude oil Pricing


Handbook of Energy Politics

Trade in the Brent—Dubai EFS contract yields the fixed price for Dubai swaps, with the Brent complex providing the ... 6 THE POLITICS OF OIL PRICE DISCOVERY Crude oil reference prices in the Atlantic Basin market (Brent Blend and West ...

Handbook of Energy Politics

Starting with the fundamentals of the global energy industry, Handbook of Energy Politics goes on to cover the evolution of capital and financial markets in the energy industry, the effects of technology, environmental issues and global warming and geopolitics. The book concludes by considering the future, including the lessons learned from history, where we are most likely to be heading and what steps we can take to mitigate potential energy risks. This Handbook will be an invaluable resource for upper level graduates and postgraduate scholars.

Oil in the 21st Century

Empirical Evidence from the Crude Oil Markets It is clear from the above brief review that the theoretical literature provides different predictions regarding the price discovery function of the futures market and whether price ...

Oil in the 21st Century

The big increases in oil prices in the past two years are upsetting consumers and puzzling producers. Climate change is casting a shadow on the future of fossil fuels. Do new energy sources pose a threat to the future of oil? These and other highly topical questions are answered by a team of international experts in this comprehensive book.

Cme Vulnerability The The Impact Of Negative Oil Futures Trading

While both trading camps are competing against each other, more importantly, they are interacting with, influencing, or being influenced by each other to fulfil futures market's most critical mission: price-discovery. Crude oil futures ...

Cme Vulnerability  The  The Impact Of Negative Oil Futures Trading

In 2020, the global lockdowns caused by the COVID-19, or coronavirus, pandemic had resulted in a sharp drop in demand for crude oil. This impact was so severe that on April 8, 2020, a proposal to update the Chicago Mercantile Exchange Holdings Inc. (CME) trading rule to permit negative prices was applied to CME's WTI Oil futures contracts; this led to a novel phenomenon in which the closing clearing price of WTI Oil May future was $-37.63/barrel based on fewer than 400 contracts' trading volume in the last three minutes, reflecting less than 0.2% of the total trading contracts volume on April 20, 2020. This occurrence of negative closing clearing price for CME's WTI Oil futures trading, cannot be explained simply by just the principle of supply and demand; instead, it highlights vulnerabilities caused by CME's allowance of negative price trading (based on its trading platform), a decision which brings potential and fundamental challenges to the global financial system.This event challenges not just our basic concepts of 'value' and trading 'price' of commodities and goods that underline our understanding of the framework for the invisible hand and general equilibrium theory in economics established by a few generations of scholars since Adam Smith in 1776 for market economies, but also have wider implications on the fundamentals that underpin our ideas of value and labor in the organization, activity, and behavior of civilizations and individual liberties.The scope of this book is limited to covering the impact of the negative oil futures derivatives' trading between April 20 and 21, 2020. This book focuses on exploring the issues, challenges, and possible impacts on global financial markets due to the negative clearing prices of WTI Oil futures contracts and related problems from different perspectives. Topics covered include the responsibilities and liabilities of the CME; critique to the fundamental theory of economics and the modern understanding of value and labor; and challenges to the global financial systems and businesses and introduction to new methods of application.

Rural Electrification

Oil and gas trades are dominated by three major markets in London, New York, and Singapore. ... Price discovery refers to the means by which a commodity, in a freely traded market, is valued, such that when the classical economic theory ...

Rural Electrification

Rural Electrification poses solutions to the insuperable modern challenge of providing 24/7 electricity for populations, housing and territory located outside towns and cities. The book reviews the historical development of rural energy systems, their status quo, and the role of renewable and fossil fueled solutions in delivering electricity. It addresses core issues of energy source typologies, resource deployment, fundamental challenges and limitations, the burgeoning threat of climate change, and the role of the renewable energy transition. Chapters account for almost all forms of fuel solutions, with a focus on electrification economics, planning, and policy using the most cost-effective fuels and systems available. Novel approaches to address the challenges of rural electrification, including distributed generation systems, new management and ownership models, off-grid systems, and future energy technologies are thoroughly explored. The work concludes with a comparative assessment of different energy supply technologies and scenarios, contrasting the pros and cons of fossil fuels versus renewable energy resources to achieve the goal of comprehensive rural electrification. Provides a suite of new approaches to deliver and expand electrification across challenging rural environments Describes optimal economics, planning and policy for electrification where there is no access to electricity Reviews how practitioners can achieve cost reductions for rural energy supply using existing technologies Addresses routes to power rural electrification within a transitioning energy economy while simultaneously accounting for climate change considerations

U S Strategic Petroleum Reserve

creased oil prices , reduced U.S. commercial oil inventories , and added U.S. consumer and taxpayer costs . ... billions of dollars in commodity transactions daily , providing traders with price discovery and opportunities for hedging .

U S  Strategic Petroleum Reserve


Singapore the Energy Economy

Without a recognized institutional mechanism for price discovery, the trade looked to the oil media for directions. The daily prices issued by Platts, Argus, RIM, Dow Jones Telerate and Reuters accompanied by reports and analysis on ...

Singapore  the Energy Economy

Singapore might not have survived the 1960s and prospered thereafter had it not built its economy on the foundations of oil refining, trading and support for oil and gas exploration and production. Cheap oil, sound policies and strong government combined to produce the Singapore economic miracle in its first 50 years of self-rule/independence. With the end of cheap oil, how will Singapore fare and what is the relevance of its model of development for other countries? Singapore’s successful launch coincided with a golden period of cheap energy, and a pro-globalization and free trade environment. These three elements are now under threat from rising energy prices and the global financial crisis which started in 2007 that will leave a lasting impact on the world's political and economic landscape. If the Singapore model is reaching or has reached its peak, what could take its place? This book poses questions for not just for Singapore planners, but also for anyone interested in modern economics and trade beyond the current era. The book also looks into the numerous subsectors within Singapore’s broad energy sector and examines the energy sector’s links with the other pillars of its economy: trade, financial, offshore/marine operations, manufacturing and transportation. It considers possible threats and challenges: Singapore’s rising energy intensity, its vulnerability to energy supply cut-offs, the likely impact of peak oil, terrorism and environmental / climate issues. It also looks at China’s growing investment and role in Singapore’s oil and gas industry. The book is a must-read for an excellent insight into Singapore’s energy economy, filled with data, information, interviews and analyses previously not available to the public.

Gasoline Prices Oil Company Profits and the American Consumer

The futures market has historically served to hedge risks against price volatility and for price discovery . Only a tiny fraction of futures trades result in the physical delivery of crude oil . The CFTC enforces the Commodity Exchange ...

Gasoline Prices  Oil Company Profits  and the American Consumer


Education Quarterly

The New Orleans Commodity Exchange has received CFTC approval to trade a corn futures contract . ... Louisiana . to serve as a hedging price discovery tool for producers , traders , refiners and consumers of crude petroleum .

Education Quarterly