These markets are in specific refinery hubs and it’s important to know which one best corresponds to your particular local wholesale market. There are seven major U.S. spot markets. See map on previous page. Who Buys and Sells? • Refiners produce fuel and may need to buy because they don’t have enough or sell because they have too much. • Traders are speculators. They bet that the market is going up or down and take very large physical positions based on those bets. • Brokers match a buyer to a seller and collect a commission. Brokers never touch the fuel. • End-Users can be fleets, truckstops or jobbers who want to supplement their rack purchases with spot purchases. However, an end-user would have to be able to trade sufficient volume on the pipeline and have enough storage to take a spot-sized fuel shipment. How Is It Priced? Now, if you were to call up the trading desk of a Gulf Coast refiner (or more likely you would get them over instant message) and ask them what they were selling spot gasoline for, they won’t say, “I’ll sell it to you for $1.50 per gallon.” They will say instead, “I’ll sell it to you for 15 cents under.” Wait. 15 cents under what?? Introducing Spot “Basis” Spot basis is the relationship between the paper NYMEX market and the physical spot market. Remember the number line your third-grade teacher taped to the top of your desk? Imagine that the current-month, sometimes called spot-month, RBOB gasoline blendstock is trading on the NYMEX at $1.65/gal. Circle that on your number line. Fuel Buying 101, Part 1: Futures and Spot Markets | Oil Price Information Service (OPIS) © 2020, all rights reserved 9