As with all commodities, supply-and-demand plays a major role in oil pricing. However, the global pool of oil and the ease with which oil moves around the world levels some of these price pressures. The global nature of oil also tends to somewhat limit the influence of any particular oil producer. From time to time new oil resources come online — like Canadian oil sands or US shale oil — which add to the global supply.
New sources can exert a downward force on oil prices even in times of heavy demand. However, extraction costs are typically higher for new resources which means these oils are only competitive in lower-supply and higher-price environments. Even though the Organisation for Economic Cooperation and Development OECD countries are reducing their road transportation oil consumption on a per-vehicle basis, the growing automobile fleet in developing countries far outpaces those minor reductions.
Many unforeseen events can also impact the price of crude oil, either increasing or decreasing it. Sometimes crude oil is confused with natural gas. They are similar but they have key differences that account for them being traded as separate commodities. Both crude oil and natural gas are flammable, nonrenewable energy sources found underground. Here are the main differences:. To find out more about natural gas as a commodity, read our natural gas page or learn how to trade natural gas.
An easy way to get breaking news about the crude oil market is to create a Google Alert which will email you top news stories about oil as they occur. Start your research with reviews of these regulated brokers available in. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Crude oil is composed of carbon and hydrogen from animals and plants that died between the Paleozoic and Mesozoic eras — the period from roughly million to 65 million years ago.
The oil comes from deep in the earth or at the bottom of the ocean. Some off-shore ultra-deep oil platforms can drill up to 1, meters beneath the surface. A trading system in which members trade verbally on a trading floor. A surface mine, open to daylight, such as a quarry. Also referred to as open-cut or open-cast mines.
The amount of unused available capability that can be applied to the system within ten minutes at peakload for a utility system, expressed as a percentage of total capability. A technique used by technical analysts to decide on which measures work best in their specific markets.
For instance, the day moving average might generate good signals for oil and commodity markets, but not foreign exchange markets. BY using optimization software, traders hope to work out which measures work well for their specific instruments. Variables can fluctuate over the life of the option, and the option's theoretical value adapts to reflect these changes.
Models include the Black-Scholes formula, binomial model, or simulation so-called Monte Carlo models. These models vary in the amount of assumptions they make about things like the distribution of future prices, and if inputs can change over time in the future as well. A contract that gives the purchaser the right, but not the obligation, to buy or sell the underlying commodity at a certain price on or before an agreed date. The difference between two indicators. For instance, a moving average oscillator would reflect the difference between two moving averages.
The oscillator ranges around a single line. An option which has no intrinsic value. A put option is out-of-the-money when its strike price is below the value of the underlying futures contract.
A call option is out-of-the money when its strike price is above that of an the underlying futures contract. The quantity of oil unloaded from a vessel at its discharge point. Out-turn pricing allows the buyer to pay only for the oil measured into receiving tanks. The amount of oil loaded on the tanker becomes irrelevant. This is a customized derivatives contract typically transacted through an intermediary such as bank or trading wing of an energy company rather than on a formal, more centralized stock exchange.
Swaps are the most common form of over-the-counter instrument. Oxygen-containing blend stocks favored for their octane and their clean burning quality. Gasoline containing more oxygen than pres formulation. Private and confidential. Used by commodities traders to describe non-public transactions. Petroleum Allocation for Defense District.
A group of five geographic areas in the US used in reference to petroleum distribution. Favored quality of naphtha for ethylene plant feedstock. Providing a customer with temporary gas storage, typically at a market hub. The maximum load during a specified period of time. The maximum electrical load demand in a stated period of time. A plant usually housing low-efficiency, quick response steam units, gas turbines, diesels, or pumped-storage hydroelectric equipment normally used during the maximum load periods.
Characterized by quick start times and generally high operating costs, but low capital costs. Capacity of generating equipment normally reserved for operation during the hours of highest daily, weekly, or seasonal loads.
A price chart pattern that looks like a vertical line with a small triangle at the top. It is seen as a sign that a trend will continue after a brief consolidation.
Platts demand-weighted index of all European electricity assessments. Chemicals derived from petroleum; feedstocks for the manufacture of plastics and synthetic rubber. Petrochemicals include benzene, toluene, xylene, styrene, and methanol. Perfluorocarbons: A group of powerful greenhouse gases used in high voltage electrical insulation, medical applications and other uses.
The transfer of ownership of an underlying commodity between a buyer and seller to settle a futures contract following expiry. An element with atomic number 94 formed as a by-product of nuclear fission in reactors. Plutonium has several isotopes, the most common of which is plutonium A charting system which ignores time and displays only the main price changes. They comprise alternate columns of 0s falls and Xs gains.
Parameters used are box-size and reversal size. Plastics made from monomers. The most common include widely traded plastics like polyethylene, polypropylene and polystyrene. The place where natural gas is aggregated from many receipt points to serve a number of contracts without tying a particular receipt point to a particular contract.
A rate for electric transmission that does not vary according to distance from the source of the power supply. So-called because postage stamps for letters are typically at a fixed price, regardless of destination. Outright, non-market-related price requested by a seller of crude oil or products. Effectively, the list price. Lowest temperature at which oil will readily flow without disturbance when chilled.
A contract involving the purchase and sales of electricity, which is normally executed between the owner of a power plant generating the electricity and the buyer of the electricity a regulated utility, local distribution company, or private sector industrial manufacturer.
Parts per million. Typically used to designate amount of metals or other impurities in refined oil products. An additional amount agreed between buyer and seller over and above an existing benchmark. Also, the price paid by an option holder to an option grantor. A method of setting a utility distribution company's rates where a maximum allowable price level is established by regulators, flexibility in individual pricing is allowed, and where efficiency gains can be encouraged and captured by the company.
In metals, primary metal refers to metal produced from mined ore, as opposed to secondary metal, which is produced from secondary sources, mainly scrap. The engine, turbine, water wheel or similar machine that drives an electric generator; or, for reporting purposes, a device that converts energy to electricity.
A prompt cargo describes a cargo available for immediate lifting one to two days. Prompt tonnage refers to tankers available to lift cargoes immediately. The tanker and petrochemical world's abbreviation is PPT. Natural gas and power hub locations where there is little or no forward trading activity. Platts' uses analysis and statistical testing to establish a defendable relationship between a proxy location and one of the editorial or market locations.
A plant that generates electricity by using water pumped during off-peak periods into an elevated storage reservoir. At peak periods, when additional generating capacity is needed, the water is released from the elevated storage reservoir to turbine generators in a power plant at a lower elevation. A hydroelectric power plant that uses both pumped water and natural stream flow to produce electricity is a Combined Pumped-Storage Hydroelectric Plant.
An option that gives the holder the right but not the obligation to sell a specified quantity of the underlying instrument at a fixed price, on or before a specified date. The grantor of the option has the obligation to take delivery of the underlying instrument if the option is exercised.
The ratio of puts to calls in an options market. Pyrolysis gasoline: a naphtha-range product with a high aromatic content, used either for gasoline blending or as a feedstock for a BTX extraction unit. Pygas is produced in an ethylene plant which processes butane, naphtha or gasoil.
A Nigerian crude oil, with an API of about OPEC sets individual crude oil production quotas for each of its 11 members. These quotas do not include condensate production. The price of petroleum products at a refinery loading rack.
Rack-pricing is effectively cash and carry at the rack. The spontaneous nuclear transformation in which an atom emits particles or radiation following orbital electron capture, or when the nucleus undergoes spontaneous fission.
When several such transformations occur in series, this is called a decay chain. By-products of butadiene extraction, the former being a key feedstock in production of MTBE.
Theory that market prices move randomly around a main trend, in other words, that the volatility is arbitrary. This is a simple momentum-type indicator. It is the simple momentum over n days divided by the price n days ago.
Nuclear reactors may be divided into two main types, fast and thermal. A fast reactor is a reactor in which the fission chain reaction is sustained with high-energy or high-speed ie fast neutrons.
It is capable of converting unused fertile uranium into fissile plutonium, a process known as breeding on fast breeder reactors A thermal reactor is a reactor in which the fission chain reaction is sustained with moderated slow or "thermal" neutrons. Regional electric company.
Also sometimes refers to owners of transmission assets. Enrichment of uranium previously enriched or depleted. Market abbreviation for refinery, used for example in contracts specifying material sold ex-refinery: ex-ref.
In oil, a plant, usually comprising distillation units and a variety of additional specialist units, for the manufacture of so-called refined products from crude oil. Major refined products include naphtha, gasoline, gasoil heating oil , jet fuel, low sulfur and high sulfur fuel oil. In copper and lead, a refinery is a plant which further purifies metal produced in a smelter.
In zinc, it is a plant which produces purer metal than could be produced in a smelter. In aluminum, it denotes a plant which refines bauxite into alumina. Re-establishing a forest by planting or seeding an area where forest vegetation has been removed see also afforestation. A high-aromatic, high-octane product made in a reformer and used to blend motor gasoline or aviation gasoline. Abbreviation for Regular gasoline. Usually leaded. Abbreviation for Regular unleaded gasoline.
A plant the accepts deliveries of liquefied natural gas LNG and processes it back to gaseous form for injection into the pipeline system. This has become one of the most widely used and popular of technical indicators.
It was invented by Welles-Wilder, and uses a simple equation comparing the average up moves in the market to the average downmoves to give a single RSI number for a certain period. The day RSI is widely used. A power source that is continuously or cyclically renewed by nature. Solar, wind, hydroelectric, geothermal and biomass electricity generation are example of renewable energy sources. Extra generating capacity available to meet unanticipated demands for power or to generate power in the event of loss of generation.
The calculated quantity of hydrocarbons or minerals which can be extracted profitably from a deposit, classified according to the level of confidence that can be placed in the data.
Standard classifications are: Proven reserves — Reserves that have been sampled extensively, for example--in mining--by closely spaced diamond drill holes or by underground working giving an accurate picture of size and quality of reserves. Also called measured reserves.
In oil, proven reserves are an estimate based on seismic and other exploratory data, linked to an assessment of economic and operating viability.
Recoverable reserve estimates are dependent on factors such as reservoir pressure and the density of strata. Probable reserves — Valuable mineralization not sampled enough to estimate accurately the terms of tonnage and grade. Also called indicated reserves. Possible reserves — Valuable mineralization not sampled enough to estimate accurately its tonnage and grade, or even verify its existence.
Also called inferred reserves. In oil, possible reserves are an estimate of reserves from an undrilled site or one that has not bee seismically tested. In oil, a naturally occurring geological formation containing hydrocarbon. In power, a structure usually a dam which stores water for later use in the production of electricity. Oil market jargon for residual fuel oils.
A price at which sellers are likely to enter the market in an uptrend. A temporary move in the opposite direction to that of the main trend. These are often. When a gas pipeline recalls gas used for electric generation and diverts it to end-use markets when gas prices are higher than power prices.
Reformulated gasoline. US specified gasoline formulated with a higher oxygen content than pres gasolines. RFG is specified to contain 2. The abbreviation RFG is acceptable in headlines and on first reference in market reports. An identification of specific risk components within transactions, assets, and contracts. This activity may use a mathematical technique to assess the likelihood of a potential adverse outcome.
Tanker abbreviation for rate not reported. The transfer of a position from one futures period to another involving the purchase sale of the nearby month and simultaneous sale purchase of a further-forward month.
Research octane number. A hydroelectric plant which depends chiefly on the flow of a water stream as it occurs for generation.
Differs from a storage project such as a hydroelectric dam , which has space available to store water from one season to another. Some run-of-river projects have a limited storage capacity pondage which permits them to regulate streamflow on a daily or weekly basis.
Reid Vapor Pressure , a measure of a gasoline's volatility. Occasionally used abbreviation for shutdown. In natural gas, the trading of transportation capacity. A price established at the close of a trading day used to calculate the settlement of futures contracts. Sulphurhexafluoride: A powerful greenhouse gas used in high voltage electrical insulation, and in medical applications, among others.
Traders are said to be short when they have contracted to sell more than they contracted to buy. In copper, lead, and zinc, a plant which reduces concentrate to metal. In aluminum, a plant which upgrades alumina into metal. A metallurgical technique, so far applied only to copper ores, in which metal is dissolved from the rock by organic solvents and recovered from solution by electrolysis.
Definitions which describe the degree of a given crude's sulfur content. Sour crudes are high in sulfur, sweet crudes are low. Sour gas is natural gas which contains lethal hydrogen sulfide, and must be purified before being injected into a pipeline. Sweet gas is gas found in its natural state which does not need to be purified to remove sulfur-bearing compounds. Basically, the cost difference of converting natural gas into electricity.
It can also be the difference between gas and electricity futures prices. Marketers use the spark spread as an arbitrage opportunity, using tolling or reverse tolling. Release of water from a reservoir over a spillway rather than putting it through turbines to generate electricity. A spillway is the overflow structure of a dam. Unused capacity available from units connected to and synchronized with the grid to serve additional demand.
The spinning reserve must be under automatic control to instantly respond to system requirements. A market where goods are traded for immediate delivery.
Strategic Petroleum Reserve in the US. The difference between two prices, either across time or between commodities or instruments. An option trade in which two or more open positions are established in order to trade the differentials and offset risk. Ethylene plant. A petrochemical plant which produces olefins, particularly ethylene, and, in some cases, aromatics. A thermal electricity generating plant which creates steam to drive a turbine.
The theory of stochastics is based on the premise that prices close nearer the high in an uptrend, and nearer the low in a downtrend. In oil: typically onland tankage facilities for short- or long-term storage of crude or products; sometimes used in economic parlance interchangeably with the concept of oil stocks.
In natural gas: facilities used to store natural gas which has been transferred from its original location. Usually consists of natural geological reservoirs like depleted oil or gas fields, water-bearing sands sealed on top by an impermeable cap rock, underground salt domes, bedded salt formations, or in rate cases, abandoned mines. Material which has come straight from an atmospheric distillation unit and has not been cracked or reformed, and which is usually used as a feedstock or as a utility fuel.
An investment with a cost recovery schedule that was initially approved by regulatory action that subsequent regulatory action or market forces has rendered not practically recoverable. Costs that utilities are currently permitted to recover through their. A test to simulate an extreme market event and examine what happens to prices under the stress of that exercise. Facility equipment that switches, changes, or regulates electric voltage. An electric power station which serves as a control and transfer of power flow, transform voltage levels, and serve as delivery points to industrial customers.
The flow of electric current without resistance in certain metals and alloys at temperatures near absolute zero. Perpetual motion on an atomic scale; the conduction of electricity without the slightest power loss; perfect conductivity.
A material that becomes a perfect conductor of electricity when chilled. Developments beginning in have raised the threshold temperature to levels which, in the near future, may provide wires capable of conducting large electric currents without line.
A price at which buyers are likely to start buying in a downtrend. Energy generating capability that is beyond the immediate needs of the producing system. This energy may be sold on an interruptible basis or as firm power. Agreement between two parties whereby a notional amount is exchanged between two parties.
The first party pays floating price and the other one pays a fixed price over a specified period of time. Facility used to tie together two or more electric circuits through switches. The switches are selectively arranged to permit a circuit to be disconnected, or to change the electric connection between the circuits.
Energy-rich vapors manufactured from coal. The marginal, variable production cost of electricity at a given level of system output. A person or entity who operates the electric system.
Abbreviation for Turnaround. Tanker market abbreviation for timecharter. Material rejected from a mill after most of the recoverable valuable minerals have been extracted. Confined in a tailings pond, the main function of which is to allow enough time for heavy metals to settle out or for cyanide to be destroyed before water is discharged into the receiving watershed. A clause in a gas supply contract which provides that a minimum quantity of gas be paid for, whether or not delivery is accepted by the purchaser.
Most contracts contain a time period in which the buyer may take later delivery of gas without penalty. Not generally included in contracts written today. Some buyers will pay the seller a fee often large to buy out the contract usually an old contract , so they are not required to take the gas. Often abbreviated to TOP by companies, but should be written in full.
Size is typically measured in deadweight tonnes cargo capacity for carrying water. Rates an regulated entity will charge to provide service to its customers as well as the terms and conditions that it will follow in providing service. Toluene disproportionation. Another process to produce benzene and xylenes from toluene. Technical grade also known as anti-freeze grade monoethylene glycol. A unit of heating value equal to , Btus, in common use in the UK.
Roughly, you can get 56 therms by setting fire to a barrel of crude oil. The dekatherm, 10 therms, is a more commonly used unit in the US. The production of electricity from plants that convert heat energy into electrical energy. The heat in thermal plants can be produced from a number of sources such as coal, oil, gas or nuclear fuel. An element with atomic number It may be used as a fertile material in a nuclear reactor as the irradiation of thorium with neutrons produces uranium, an artificial fissile material like plutonium The volume of gas flowing through a pipeline, ore processed by a concentrator etc.
A rate design which divides customer use into different tiers, or blocks, with different prices charged for each. The time component in a premium for an option art. Typically the time value of an option declines as it moves closer to expiry. The chartering of a tanker or other freight vessel for a period of time rather than for a specific voyage.
An arrangement whereby a party moves fuel to a power generator and receives kilowatt hours kWh in return for a pre-established fee. A fee paid for use of electric generation assets used to convert fuel to power. The standard Platts abbreviation is mt.
A tonne, or metric ton, sometimes tautologically referred to as a metric tonne, is defined as the weight of one cubic meter of water. Rough-and-ready barrel-tonne conversion factor is 7. An electrical device for changing the voltage of alternating current.
The network of high voltage lines, transformers and switches used to move electricity from generators to the distribution system. Also used to interconnect different utility systems and independent power producers together into a synchronized network.
Transmission is considered to end when the energy is transformed for distribution to the consumer. The power lost in transmission between one point and another. It is measured as the difference between the net power passing the first point and the net power passing the second point. See also Custom smelter. Many technical measures attempt to discern when a price is moving in a trend, punctuated by minor corrections, and when it is simply trendless.
Lines drawn on a price chart linking subsequent lows in a downtrend and subsequent highs in a uptrend. Chart pattern. Prices trade sideways after a main trend, and the range gets smaller each day. A bullish reversal pattern characterized by three highs at roughly equal value. A bearish reversal pattern characterized by three highs at roughly equal value. The part of a generating unit usually consisting of a series of curved vanes or blades on a central spindle, which is spun by the force of water, steam or hot gas to drive an electricity generator.
A refinery or petrochemical plant is said to be "in turnaround" when it is taken out of service of maintenance, usually planned. Temporary voluntary abatement. Often used in the US petrochemicals market. A charge for electricity consisting of a demand kW component and an energy or commodity kWh component. Tanker market term for the UK and northwest European region closest to it. Ultra large crude carrier; with a capacity of ,, dwt.
Natural gas that cannot be produced using current technologies. Where a long market player has bought more of a commodity than he has agreed to sell, or where a short market player has sold more of a commodity than s he has to deliver.
When the grantor of an options position has no cover in the underlying futures market against a price swing in the holder's favor see delta hedging. A price pattern characterized by subsequent rising highs and rising lows. The heaviest naturally occurring element atomic number It is metallic and slightly radioactive. Its only substantial use today is as a raw material for generating electricity via nuclear fission.
Ranging in atomic mass from to , uranium has 14 isotopes, of which only three occur naturally: uranium, uranium, and uranium The coronavirus pandemic altered those dynamics. With many families under lockdown, spending shifted from services into goods everywhere, even in the richest nations like the U.
In many ways, American and European consumers behaved for a few months like their counterparts in emerging countries, spending on everything from new bicycles to television screens.
The U. Overall consumer spending remains below the trend, but that masks a huge divergence between spending in goods and services. The fiscal stimulus has other parallels with emerging markets as Western governments are targeting infrastructure spending, promising to rehabilitate their highways, railways and bridges.
Governments are also keen to build a greener future, spending on electrification to move away from fossil fuels. For the first time the world's two super powers, the U. Supply is struggling to catch up. And others are due to the difficulty of running mines, smelters, slaughters houses and farms in the middle of the pandemic. The forces slowing the supply response are twofold. First, companies are under pressure from shareholders and courts to join the fight against climate change, reducing their production of fossil fuels like coal, oil and gas.
Second, the same shareholders are demanding that chief executives reward them with higher dividends, in turn leaving less money to expand mines or drill new wells. The impact of those forces are evident already in some corners of the commodity market, where companies stopped investing in new supply several years ago.
Take thermal coal, for example. Mining companies have been cutting spending since at least Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Lulu, Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Related Articles. Energy Trading How to Invest in Oil. Oil OPEC vs. Partner Links. Shale oil is a type of oil found in shale rock formations that must be hydraulically fractured to extract. Read about the pros and cons of shale oil. Crude Oil Definition Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials.
What Is Peak Oil? Peak oil refers to a hypothetical point at which global crude oil production will hit its maximum rate, after which production will start to decline. Anticipatory Hedge Definition and Uses An anticipatory hedge is a futures transaction used to lock in prices on an upcoming purchase or sale. It can be a full or partial hedge. What Are Futures in Investing? Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.
What Is a Derivative? A derivative is a securitized contract whose value is dependent upon one or more underlying assets. Its price is determined by fluctuations in that asset. Investopedia is part of the Dotdash publishing family.
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