Oil Futures Contracts Quotes

Saipem, an Italian-based company founded in 1957, has built some of the world's largest energy and infrastructure projects. It is organized into five business divisions that focus on onshore and offshore drilling, engineering and construction, and conceptual design services. Given its connection to oil and gas contracts, which effectively collapsed in 2014 with a plunge in oil prices, it has had to set a course beyond fossil fuels and rethink everything about its business. This "change or die" scenario sets the tone for its reporting and disclosure. Its 2019 sustainability report acknowledges the scenario it is facing and tackles the issue of the low-carbon transition head-on. At its core is the organziations rallying call, or "the four challenges," which describe the context and frame the opportunities it must capture to remain competitive.

By making no decision, OPEC had ceded control to what might be called the “swing investors”—the financial markets—the hedge funds and traders and other financial players that dealt in “paper barrels.” “Sentiment” among these investors—whether they were optimistic or pessimistic, bullish or bearish about prices and the market—would determine whether they went “long” or “short” on futures contracts. And their cumulative decisions would in turn accentuate price moves in one direction or the other. At this point, sheer bearishness predominated. Prices fell below $30 and seemed headed toward $25 a barrel. Some investment banks warned that oil could fall below $20. “The oil market is much bigger than just OPEC,” Naimi said in February 2016, but other countries had demonstrated “no appetite for sharing the burden.

In the futures markets, they bought and sold paper contracts. Futures contracts had been around for more than a century and were an integral part of the food system. Corn, pork, and soybean futures were traded on the Chicago Board of Trade. The NYMEX specialized in eggs and butter. The futures market wasn’t big—traders in the market tended to be farmers and big grain millers. They used futures contracts to limit their risk. The owners of the NYMEX weren’t content with their sleepy corner of the financial world, and they decided to expand their business and sell contracts for new kinds of products. The NYMEX introduced the first futures contract for crude oil in 1983. At first, the birth of oil futures contracts looked like a threat to Koch’s business model. Howell and his team spent years figuring out how to be the smartest blind men in the dark cave of the physical oil business and making the best guess as to the real price of oil. Koch Industries had gained an expertise in exploiting the opacity of oil markets and wringing the best price out of its counterparties. The new oil futures contract created something that was anathema to this business model: transparency. When the NYMEX debuted its oil futures contract, it created a very visible price for crude oil that changed by the minute on a public exchange. Again, this wasn’t the price of real crude; it was the price for a futures contract on crude, reflecting the best guess of all market participants as to what a barrel of oil would be worth in the future. Even though the futures price wasn’t the real price, it provided everybody with a common reference point. Now, when Koch called up someone to buy oil from Koch’s tank farm in St. James, that customer could look at a screen and start haggling based on what the markets in New York were saying the price of oil was worth. “It was the first time that there was a common, visible market signal,” Howell said. “It just kind of sucked the oxygen out of the room for that physical trading.

In the stock market, it is illegal to trade on inside information. If a CEO knows that her firm is about to buy a smaller competitor, she cannot go buy shares of that smaller firm before the news is publicly announced and the shares jump in value. The idea behind the ban on insider trading is that it makes the markets an even playing field for ordinary investors. Futures markets are different. When regulators built the modern futures markets during the 1930s, in fact, they wanted traders to use inside information when they bought and sold futures. This way, the thinking went, the markets would quickly reflect the most accurate price possible. When traders used inside information to buy or sell contracts, their actions would quickly send price signals to everyone else. While it was legal to use inside information in the futures markets, the power to do so was concentrating into fewer and fewer hands during the 1980s. Koch Industries was one of relatively few firms in the world that was able to ship oil by the barge load while simultaneously making bets in the futures market about what would happen when that barge load of oil arrived on shore. Koch exploited this advantage to the fullest extent.