Monday, 16 May 2011 09:09

PRICING OF CRUDE OIL / PETROLEUM

Until 1985, the pricing of crude oil was done by the OPEC (The Organization of the Petroleum Exporting Countries)- administrated pricing system. But with the collaps of this system in 1985, the oil exporting countries started to use a marked- linked pricing mechanism. PEMEX (Mexican state- own petroleum company) adopted it first in 1986 and it became widely accepted and the main method of pricing crude oil in international trade from 1988 until now.

The price of crude oil/ petroleum as guoted in the media often refers to the price per barrel (159 liters) of either Brent, witch is traded on the International Exchange or light crude/WTI witch is traded on the New York Mercantile Excange(NYMEX).

There are especially three factors witch determins the price of a barrel of oil. The first is the oils specific gravity or API (The American Petroleum Institutes gravity measurment). The API determines how heavy or light crude oil/petroleum liguid is compared to water. The second factor is its sulfur content and for the third it is where its located.

As we can understand from above, the crude-oil-prices is depending on a lot of different factors wich in the end is determined by demand and shortage or oversupply from OPEC as well as the non -OPEC countries.

Look at the crude oil price graph and the crude oil price history chart below and see how the crude- oil-prices varies in value over time.

crude oil price graph

 

 

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