The spot price is the price at which a commodity can be bought or sold for immediate delivery in the current market. It is the most direct measure of a commodity's market value and underpins the pricing of all derivative instruments — forwards, futures, options, and swaps.
Spot vs Forward vs Futures
| Market | Delivery | Price | Settlement |
|---|---|---|---|
| Spot | Immediate (1–5 days) | Current market price | Physical delivery |
| Forward | Agreed future date | Negotiated bilaterally | Physical or cash |
| Futures | Standardised future date | Exchange-traded | Mostly cash-settled |
| Swap | Periodic over term | Fixed vs floating exchange | Cash settlement |
How Spot Prices Are Assessed (PRAs)
Physical commodity spot prices are not set on a central exchange but assessed by Price Reporting Agencies (PRAs). The major PRAs for petroleum:
- S&P Global Platts — European benchmark (Platts ULSD 10ppm CIF NWE for EN590, PJABA00 for Jet A-1)
- Argus Media — Alternative assessments; widely used for bitumen, LPG, and some crude markets
- ICIS — Focus on petrochemicals and some refined products
PRA assessments are conducted in a defined window each day (typically 16:00–16:30 London time) using reported bids, offers, and transacted prices. The resulting assessment is used as the pricing basis for physical contracts across the market.
Spot Price in Contract Pricing
Most physical petroleum contracts are priced against a PRA spot assessment:
- "Price = Platts ULSD 10ppm CIF NWE Cargoes + $X/MT premium" — the most common EN590 contract structure
- The premium/discount reflects product quality, delivery location, timing, and seller margin
- Pricing periods are defined in the contract: e.g., average of 3 days around BL date (Bill of Lading date)
Frequently Asked Questions
- What is spot price in commodity trade?
The spot price (also called the cash price) is the current market price for immediate or near-term delivery of a physical commodity. For petroleum, 'immediate' typically means delivery within 2–5 business days. Spot prices are discovered through active market trading and reported by price reporting agencies (PRAs) such as Platts, Argus, and ICIS.
- What is the difference between spot price and futures price?
The spot price is for delivery now (or within a few days). The futures price is for delivery at a specified date in the future — 1, 2, 3 months out, or further. The difference between spot and futures is the 'basis' or 'spread', which reflects storage costs, financing (carry), and supply/demand expectations for the forward period.
- How are petroleum spot prices published?
Petroleum spot prices are assessed and published daily by Price Reporting Agencies (PRAs): S&P Global Commodity Insights (formerly Platts), Argus Media, and ICIS. These agencies survey traders' bids, offers, and transacted prices in defined assessment windows (typically 16:00–16:30 London time for European markets) to produce a single representative price assessment.