Get instant access to this case solution for only $15

Note on Crude Oil and Crude Oil Derivatives Markets Case Solution

Solution Id Length Case Author Case Publisher
2542 633 Words (3 Pages) Kuljot Singh, Wai Lee Harvard Business School : 295053
This solution includes: A Word File A Word File

The study provides in-depth knowledge of the crude oil market in the context of trading while using various derivative contracts. In the '70s, the spot market was dominated wherein major oil trading was executed in large physical cargoes or parcels in one-off transactions for near-term delivery. However, deregulations played a critical role in the development of future markets which came into being to counter the instability in the spot prices. In this regard, it is important to understand the key distinction between following derivative markets.

Following questions are answered in this case study solution

  1. Spot trading & forward trading

  2. Exchange traded derivatives & over counter (OTC) derivatives

  3. Contango & backwardation

Case Analysis for Note on Crude Oil and Crude Oil Derivatives Markets

1. Spot trading & forward trading

Spot trading of oil involves immediate delivery or lifting at a specified delivery point at the current market rate. The informal network of traders is involved through telexes and telephones and can trade one cargo many times before delivery to the final user. On the other hand, forward trading is a solution to the uncertainty in the spot prices whereby a specific quantity of oil with a predetermined price for a specific period is locked between two parties (i.e., buyer & seller). For this purpose, the most popular forward market was the UK Brent market which was a benchmark crude oil blend. Two types of forwarding contracts include dated delivery contracts (spot transaction with delivery within a specific date range) and fifteen-day delivery contracts (forward transaction with delivery at a specific time in the future). These contracts were traded for delivery up to 3 months with few actual physical deliveries. 

2. Exchange traded derivatives & over counter (OTC) derivatives

Get instant access to this case solution for only $15

Get Instant Access to This Case Solution for Only $15

Standard Price

$25

Save $10 on your purchase

-$10

Amount to Pay

$15

Different Requirements? Order a Custom Solution

Calculate the Price

Approximately ~ 1 page(s)

Total Price

$0

Get More Out of This

Our essay writing services are the best in the world. If you are in search of a professional essay writer, place your order on our website.

Essay Writing Service
whatsapp chat icon

Hi there !

We are here to help. Chat with us on WhatsApp for any queries.

close icon