EBF 301
Global Finance for the Earth, Energy, and Materials Industries

Natural Gas & Crude Oil - Physical Pricing


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 ARGUS are the primary reports showing postings for crude oil & natural gas liquids (NGLs).
  • Parallelism recognizes the fact that both financial and physical markets are influenced by similar things.
  • Convergence is the tendency for the financial contract to approach the value of the physical commodity as it approaches settlement.


The lecture slides can be found in the Modules under Lesson 4: Energy Commodity Logistics - Crude Oil.

The following links will take you to each publication's website and some sample publications.