Posted Price

What Is a Posted Price?

The posted price is the price at which buyers or sellers will execute for a specific commodity. Contingent upon the conditions, the posted price might vary tangibly from the market price of that commodity.

The market price is the ongoing price at which an asset or service can be bought or sold. The market price of an asset or not entirely set in stone by the powers of supply and demand.

How Posted Prices Work

Commodities are any essential goods and services that are required across an extensive variety of supply chains. Instances of commodities incorporate energy products, like oil, gas, and power; food products, like wheat, corn, and soil beans; and metals, like steel, platinum, and gold.

As opposed to executing straightforwardly with one another, organizations are able to buy and sell commodities undeniably more productively by routing their orders through an organized exchange. The exchange, which likewise includes brokers and different middle people, permits market participants to discover the best available price for a given commodity, and to present their offers to buy or sell at a predetermined price.

At the point when companies present their buy or sell orders into a commodities exchange, the price at which they will execute is known as the posted price. Other market participants will actually want to see that offer to trade, and this data will be utilized to decide the overall market price.

In the aggregate, the balance of posted prices will influence the bid-ask spread of a given commodity. A bid-ask spread is the amount by which the ask price surpasses the bid price for any asset or commodity in the market. Assuming buyers and sellers differ emphatically on the fair value of the commodity — that is, assuming they differ on the price at which they will trade — then, at that point, the bid-ask spread will be wide. Alternately, in the event that the posted buy and sell prices are fairly close together, the bid-ask spread will be narrow.

Now and again, individual market participants will offer posted prices that are widely dissimilar from what the majority of buyers and sellers will acknowledge. In those situations, the posted price will have little influence on the market as a whole. In this situation, this participant may likewise battle to find a party ready to acknowledge their posted price.

Illustration of Posted Price

Since commodity prices vary in light of supply and demand, it isn't uncommon for the heading of posted prices to change essentially in response to unanticipated occasions, for example, a huge auto safety recall, a crisis in a foreign, oil-rich country that drives up oil prices, or a drawn out dry spell that decimates crops.

In the oil industry, posted prices are much of the time influenced by the flow of oil supplies between processing plants, terminals, pipelines, and other critical stages in the industry's supply chain. Albeit individual market participants are free to present their own posted prices, most gatherings in the industry utilize a common benchmark, known as the West Texas Intermediate (WTI), as a reference while pricing their orders.

Similarly, the Canadian oil market commonly decides its posted prices by referring to the WTI and applying a standard price differential. This adjusted price is then reflected in a subsequent benchmark widely utilized in Western Canada, known as the Western Canada Select (WCS).

The difference between these two benchmarks-WCS and WTI-is subject to change in view of conditions in those given locales. For instance, from late 2017 to mid 2018, the gap between the two benchmarks changed definitely, as production in Alberta exceeded the area's pipeline capacity. The oversupply made buyers discount WCS oil against WTI more steeply than in the recent past. This action essentially scaled down both their posted prices and the subsequent benchmark.

Features

• Despite the fact that companies are free to set posted prices as they see fit, they generally unite around settled upon market prices or benchmarks.
• Posted prices are the prices at which market participants will buy or sell a specific commodity.
• Since commodity prices are driven by supply and demand, posted prices will frequently change abruptly in response to unexpected disturbances in their applicable supply chains.