Something has been bothering me as I read new news stories regarding the current oil price… When most columnists talk about the price of oil, they’re talking about the current rate of WTI, as listed on tracking sites like this one.
This is certainly an important metric to view… It shows the trends in the market over time, as well as provides a window into the general mood of the market and predictions about where the price will go.
It is not, however, fully accurate to say that this price is the actual price of oil. Rather, this is the price of an oil futures contract for delivery in the middle of the next month. You can do futures contracts for any desired time… months or even years in advance!
To find out what oil producers are presently realizing in the open market, at least for the non-integrated e&p companies, one should turn to a resource like the Plains Pipeline price bulletin, which may be found here. This is the current price, to the day, of the oil that is being marketed right now.
When one looks at these figures, they are pretty scary… We may be hovering in the mid-thirties on futures contracts of WTI… but at this moment, where we all live and breathe, the price of oil is dangerously close to the $30 threshold… A few more losses on the futures markets and many companies may actually see oil in the $20s.