PRAs and the commodity markets Flashcards
what is the information gap PRAs fill?
exchanges only list information on commodities which are transparent - PRAs fill the gap for smaller and niche commodities
definition of a PRA
“PRAs are firms that assess the fair price of commodities and report these values to a wider audience that then uses those assessments of price either for information purposes or else as the basis for physical or financial transactions
what info will buyers pass on ?
the market is oversupplied and that prices are weak. - to keep lower prices
what info will sellers pass on?
constantly be reporting high-priced deals, shortages of material and frantic demand from buyers
what position will speculative traders give?
flip between one side and the other depending on their position on any given day or week.
How does a PRA navigate all these sources?
a well-designed methodology for assessing prices.
How does a PRA remain fair?
PRA needs a robust methodology and good engagement with a range of market sources.
Trading screens
What info is already known to companies?
The price their gvmnt requires them to sell at and the main prices of oil from newspapers
What can PRAs tell sellers
The international market value to see if it snore profitable to sell domestically or as an export cargo
What do subscriber’s use PRAs for?
Physical and financial transactions
What is benchmark usage?
Where two traders agree to use PRA pricing data as the basis of the deal between them
Why would you use a PRA?
To reduce arguments in negotiations
What do traders decide on if they use a PRA
The premium - is it 30 cents or 40 cents per barrel to the assessments
What happens at the time of delivery?
Traders look at the assessments, see the price platts assessed and set the premium with that
What does the PRA allow traders to focus on?
Premium/ discount giving things like Delivery schedule, physical quilaity and repayment terms
