International Crude Oil Market Guide

Comprehensive Guide to the Mechanisms of the Crude Oil Market

This comprehensive guide covers the international crude oil market, including pricing mechanisms, spot trading, long-term contracts, oil tanker logistics, refining, and energy e-commerce. Based on publicly available research from leading energy institutions, this 2024-2026 updated reference work provides an in-depth understanding of the global petroleum industry.

Key Reference Sources

• U.S. Energy Information Administration (EIA)
• International Energy Agency (IEA)
• Oxford Institute for Energy Studies
• S&P Global Platts
• ICE Futures Europe

Copyright Statement

This document is compiled, synthesized, systematized, and presented by Petroleum Technology for research, training, and knowledge dissemination purposes in the energy sector. Although data, definitions, and reference information are extracted from international public sources including EIA, IEA, S&P Global Commodity Insights, Platts, Argus Media, ICE, CME Group, Oxford Institute for Energy Studies, and other specialized industry reports, the entire content structure, interpretation, knowledge diagrams, systematization methods, and editorial work are the research results of the Petroleum Technology editorial team.

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Chapter 1: The Spot Market - The Conductor of Global Oil Prices

The spot market is the center for physical pricing in the global petroleum industry. Although spot trading volume accounts for a relatively small percentage of total global crude oil trade, nearly the entire international oil pricing system originates from signals in this market.

Long-term contracts, Official Selling Prices (OSPs), forward contracts, and physical transactions between countries all directly or indirectly reference benchmarks formed in the spot market.

The Indispensable Role of Spot Markets

The spot market is where buyers and sellers trade physical crude oil parcels, with delivery periods typically ranging from 15 to 45 days depending on the region.

There is no centralized exchange for physical crude oil. Transactions are conducted primarily through:

• Bloomberg Terminal
• Reuters Eikon
• Electronic trading platforms
• International commodity brokers
• Over-the-counter (OTC) direct agreements

The most critical point is that the Official Selling Prices (OSPs) of Saudi Aramco, ADNOC, KPC, SOMO, Petrobras, and other National Oil Companies (NOCs) are constructed from spot benchmarks plus or minus quality differentials.

In other words, the spot market forms the foundation of the entire global oil pricing system.

Brent Complex - The Global Benchmark

Brent is currently the most important benchmark in the world. Approximately 70-80% of internationally traded crude oil is priced based on Brent.

However, modern Brent is no longer solely oil from the Brent field. Today's Brent is a complex benchmark system comprising:

This system is commonly referred to as BFOET + WTI Midland. The addition of WTI Midland in 2023 has increased liquidity and maintained representation for the global market.

Four Tiers of the Brent Complex

Dated Brent is currently the most important price anchor for international physical oil.

WTI - The US Benchmark and Geographical Paradox

WTI is the famous light sweet crude oil of the United States:

Physical delivery point: Cushing, Oklahoma

This is an inland pipeline hub located approximately 700 km from the coast. This characteristic creates WTI's famous "geographical paradox." When the storage system at Cushing becomes overloaded, WTI prices can completely separate from international oil prices.

The Negative Oil Price Event of 2020

April 20, 2020 marked a historical event when WTI Futures for May 2020 fell to -$37.63 per barrel.

Causes:

• The COVID-19 pandemic caused demand to collapse
• Cushing storage facilities were nearly full
• Contract holders could not take physical delivery

For the first time in history, sellers had to pay buyers to take the oil.

Dubai/Oman - The Pillar of the Asian Market

Approximately 70% of oil exported from the Middle East to Asia is priced according to Dubai or Dubai/Oman.

Dubai Crude specifications:

Due to declining actual production over time, Platts developed a pricing system based on:

• Dubai Swaps
• Dubai Structure
• Spread Market

Thanks to this system, the Dubai benchmark has maintained its crucial role in Asian oil trade.

Murban - ADNOC's New Benchmark

In March 2021, ADNOC launched Murban futures contracts on ICE Futures Abu Dhabi.

Murban specifications:

Murban represents the most significant effort by the Middle East in decades to build an independent benchmark serving the Asian market.

Murban trading volume continues to grow and is increasingly being used by international refineries in long-term purchase contracts.

Copyright Notice

This document is part of the research series:

PETROLEUM INDUSTRY KNOWLEDGE — BASED ON PUBLIC RESEARCH

Edited and systematized by Petroleum Technology

© Petroleum Technology. All rights reserved.

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