How is oil bought & sold on the world market?

Question

For example, I get the impression that an Exxon doesn't simply buy oil directly from Saudi Arabia, but that instead, there are speculating middlemen who intercede along the way, and evidently are able themselves to affect the ultimate price to oil companies, and so, to consumers. Who are these middlemen in the oil transaction, how much impact do they exert on prices, and why do they have to exist in the first place (i.e., why can't an Exxon simply "buy direct" from Saudi Arabia, and cut these speculators out of the deal altogether?

Answer 1

Most of the oil bought by refiners and chemical companies is in fact purchased directly from producers under long-term contracts. However, since most of this oil is shipped intercontinentally using tankers, scheduling problems arise all the time. Refineries and chemical plants depend on steady inflow of oil, but deliveries may be disrupted by ocean storms, delays in ports, etc. So quite often, the buyers need to purchase a few days' worth of oil to keep a particular refinery operating next week, because the oil that it was supposed to use next week is currently on the tanker in the middle of Atlantic, rather than in the port. When that oil finally shows up, the buyer has no use for it and needs to sell it to prevent its storage facilities from overfilling. So the speculative market plays a useful role, providing an outlet where buyers can buy holdovers or sell leftovers...

Answer 2

Major oil companies such as Exxon do not have to rely on buying from middle men OR from Saudi Arabia -- they own their own wells and pull oil out of the ground themselves.

Where middlemen do exist, as with any industry, it's because it is more efficient that way. One producer has a million potential customers: it would take an enormous amount of work to deal with all of them directly. So they deal with a smaller number of distributors, who each are able to distribute to a manageable number of customers.

Answer 3

You are rigth. There is a complex structure behind this business but the magnitude of the transactions determine who are protagonist in it and let to simplify and tell "Exxon buy oil to Saudi Arabia".
Most of the time the oil countries has a holding that has the control of all the operations: extraction, transportation, trading and, maybe, Exxon buy oil to Osama Trading Oil Company, but the owner of this is the government of Saudi Arabia.