A market of transactions
At heart, the oil market is a global auction. The oil price is the result of thousands of transactions taking place simultaneously around the world at all levels of the distribution chain. Various types of agreements and contracts cover the bulk of the oil that changes hands. Oil is also sold through spot transactions per shipment or per transaction. In addition, oil is traded on futures markets – the intention being to split the risk between buyer and seller and to reflect different future expectations of the market.
Seasonal variation and stock levels
Seasonal variation in the oil industry is an important underlying factor affecting the balance between supply and demand, and thus also price fluctuations. All other things being equal, demand for crude oil tends to be higher in the fourth quarter due to cold weather and storage.
Demand weakens in the northern hemisphere in the latter part of winter because global demand falls as the weather gets warmer. At the same time, the price of various oil products tends to be highest relative to crude oil as they approach their high season – late spring
The oil Market for petrol and late autumn for heating oil. I practice there are many other factors that reflect and influence the price of oil, making the seasonal pattern less obvious. Supply is also affected by stock levels. High levels tend to result in lower prices, while low stock levels have the opposite effect.