What is Posted Price
The posted price is the price at which a company has publicly announced it will buy or sell a commodity. A commodity is a necessary good used in commerce that is interchangeable with other commodities of the same type.
In markets where an official exchange does not operate, traders will often refer to the posted prices of the major companies trading in that particular commodity.
BREAKING DOWN Posted Price
A posted price may represent either the rate at which a company is willing to buy a commodity or the price at which it is ready to sell the product. Therefore, the posted price typically has a relationship to a company’s bid and ask spread. The bid-ask spread is mostly the difference between the highest rate that a buyer is willing to pay for an asset and the lowest price a seller is willing to accept to sell the commodity.
Posted prices offer a starting point for commodity prices in situations where the actual market price is unknown.
In areas where a commodity does not trade on an official exchange, it can be difficult for traders to evaluate pricing and make investment decisions. In those cases, posted price offers a benchmark to use in place of a quoted price. Such benchmarks could involve either a specific cost or an amount calculated off of quoted prices of similar commodities. The posted prices of major companies can also be aggregated to form an average price that serves as a benchmark for a commodity.
Oil Industry Example of Posted Price
In the oil industry, posted prices often get established where large quantities of oil or gas move from one entity to another, such as refineries, terminals and significant interconnections between pipelines. For example, many markets will use the price of West Texas Intermediate (WTI) crude as a benchmark in their pricing.
Cushing, Oklahoma, serves as the primary settlement point for WTI crude, which comes mainly from the Midwest and Gulf Coast regions of the United States. The Energy Information Administration of the U.S. Department of Energy lists the average price paid for WTI crude oil on a daily basis. This regular listing makes WTI a readily available point of reference for other markets.
The Western Canadian oil market has no formal commodity exchange on which to trade. Major oil companies issue a posted price for Western Canadian oils with a basis of a price differential applied to the WTI benchmark. Averaged together, these posted prices, in turn, serve as a benchmark for the price of crude oil in Western Canada, called Western Canada Select (WCS).
The differential between WCS and WTI is subject to change based upon conditions in the region. For example, in late 2017 to early 2018, the gap between the two benchmarks changed drastically as production in Alberta outstripped the area’s pipeline capacity. The oversupply caused buyers to discount WCS oil against WTI more steeply than in the recent past, significantly reducing both their posted prices and the resulting benchmark.