Even though the prices of energy "futures" influence the physical markets, prices are negotiated outside the infamous and chaotic trade floors of the exchanges. Buyers and Sellers, looking at their supply and demand situations, make pricing decisions daily and actually buy and sell the physical commodities. The results of these trades are reported in industry publications and become market indicators for the physical "cash" market.
Key Learning Points for the Mini-Lecture: Physical Natural Gas & Crude Oil Pricing
While watching the Mini-Lecture, keep in mind the following key points and questions:
- Historically, prices were set for long-term contracts at fixed numbers.
- De-regulation created the need for shorter-term pricing.
- The physical commodity market has its own pricing scheme.
- Cash market prices are reported by industry publications using survey methodology and are known as “indexes” or “postings.”
- Inside FERC and Gas Daily are the main postings for natural gas.
- OPIS (Oil Producers Information Service) and ARGUSare the primary reports showing postings for crude oil & natural gas liquids (NGLs).
The lecture slides can be found in the Modules under Lesson 5: Energy Commodity Logistics - Crude Oil.