There are several grades of domestic and internationally traded foreign crudes and each serve the diverse needs of the physical market. Light, sweet crudes are preferred by refiners because of their low sulphur content and relatively high yields of high-value products such as gasoline, diesel fuel, heating oil, and jet fuel.
Crude oil is the world's most actively traded commodity and the NYMEX Division light, sweet crude oil futures contract is the world's most liquid forum for crude oil trading, as well as the world's largest-volume futures contract trading on a physical commodity. Because of its excellent liquidity and price transparency, the contract is used as a principal international pricing benchmark. The contract trades in units of 1,000 barrels, and the delivery point is Cushing, Oklahoma, which is also accessible to the international spot markets
Crude Market Influences
As with all commodities that are readily supplied by several countries, crude oil can tend to either be in over supply or short supply.
When there is a short supply, prices bid up to the highest that the market sustains. When supply is ample, prices sink to the lowest that producers will accept. There is no happy middle ground. That is why commodity prices (not only oil, but cocoa, metals, etc.) are "volatile" and why it is so easy to lose your shirt in commodities trading.
So along with traditional supply and demand economic issues, there is also an incredible incentive to manipulate the market for a commodity.
For example, every time OPEC (Organisation of the Petroleum Exporting Countries) gets together and discusses cutting production, oil prices go up. If Iran pursues an atomic bomb and openly announces every milestone in their programmme, oil prices go up.
The knock on effect is that products made with oil, copper or silver get more expensive, manufacturers pass on the higher costs, prices among goods and services re-adjust, and life goes on.