Crude Oil

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Contract Specifications

Commodity Name Crude Oil
Symbol CRUDE
Basis for price quote Ex- Mumbai excluding all taxes, levies and other charges
Trading unit  100 Barrels
Delivery unit 50,000 Barrels
Quotation /   Rs per Barrel
Tick size (minimum price movement) Rs 1 per Barrel
Delivery Both Option
Delivery Designated Port at Mumbai/JNPT





Crude oil is refer to Petroleum in its unprocessed form including Brent crude oil, Heavy crude oil, Pennsylvania Grade Crude Oil, a type of sweet crude,  Synthetic crude oil. Light sweet crude oil is a grade of Crude oil. It's formed from plants and animals that were buried millions of years ago, the remains were buried deeper and deeper then the enormous heat and pressure turned them into oil and gas. Crude oil is a naturally occurring substance found trapped in certain rocks below the earth's crust. It is a dark, sticky liquid which, scientifically speaking, is classed as a hydrocarbon. Crude oil is naturally occurring inflammable liquid consisting of a complex mixture of hydrocarbons, separated through distillation in to a large no of consumer products from petrol, kerosene to asphalt and chemicals reagents use to make plastic and pharmaceuticals. Crude oil is measured in barrels. One barrel equals 42 US gallons, or 159 liters. When crude oil first came into large-scale commercial use in the United States of America in the 19th century, it was stored in wooden barrels. Crude Oil is the single most important commodity that holds the position of a key factor in each and every economy of the world.

History:
It is said that the Oil Industry History is more than five thousand years old. In Middle East crude oil was used for making their boats water proof and also to medicate for certain kind of diseases. The first oil well was drilled in china at 347 A.D. up to 80 feet deep using bits attached to bamboo piles. In 1735, oil was first extracted from oil sands at Pechelbronn field in Alsace, France and According to Oil Industry History the first structured oil wells were built in the Gulf of Mexico. This was made on a place which was nearly 100 meters deep. This was just the beginning of the making of the structured well both on lands and on water.

All this time oil had a limited use until in 19th century until the process of distillation of kerosene with the help of coal and rock oil was invented. In 1848 first modern oil well is drilled in Asia, on the Aspheron Peninsula north-east of Baku, by Russian engineer F.N. Semyenov. Oil has always been a very important commodity to human being and more nowadays. Up till 1950s coal had dominance among the primary energy constituents but crude oil took over the leadership in a short span of time and has still maintained its reputation. Today Crude oil is the source of approx 40% of total energy in the world.  The importance of oil has reached such a level at which there is no country in the world, which doesn't need oil and meets its by-products, and if somehow it doesn't have much reserves of oil to meet their domestic demand, these nations are ready to import the product at any cost.

Production:
OPEC (Organization of the Petroleum Exporting Countries) is contributing more than 80% of world proven crude oil reserves. OPEC was established in 1960 with five founder members Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. It took a decade to establish its influence in the world market. By the end of 1971 six other nations had joined the group. In terms of crude oil, we can divide the world in OPEC countries and Non OPEC countries. OPEC countries are the major crude oil reservoirs. Country wise Saudi Arabia has the highest crude reserve 264,516 million barrels which was overtaken by Venezuela in 2010 by having crude reserves 296,501 million barrels as compared  to 211,173 million barrels in 2009, followed by IR Iran 151,170 million barrels and Iraq having 143,100 million barrels.

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(In above  chart dotted lines show the world's top countries in terms of crude oil reserves.)

In 2010 Total world crude oil production was 69.7 million bpd (barrels per day) it decreased by 1.9 million bpd as compared to 2006. Russia is the major producer of crude oil and acquired no. 1 position It shared 9.8 million bpd followed by Saudi Arabia 8.16 bpd and united Stated 5.5 million bpd per day. As OPEC has highest Crude reserves but it produce only 42% of total world production, whereas OECD has just 4% crude oil reserves and produces 19% of total crude production.

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In distillation process, 42 gallons (one barrel) of crude oil produces 19.5 gallon of gasoline, 9.2 gallon of Fuel oil, 41. Gallon of Kerosene type jet fuel, 2.3 gallon of Residual fuel, 1.9 gallon of Liquefied refinery gasses and others of 7.2 gallons.

In refining process, OPEC share has reduced to just 10% whereas OECD countries has the biggest share approx 52 % of total World Refinery.  Asia pacific and North America has the highest refining capacity of crude oil of approx. 24.7 mbpd and 19.7   mbpd respectively in 2010 as compared to 23.9 mbpd and 19.3 mbpd respectively in 2006.  United States increased their refining capacity by 4% and reached to 17.8 million bpd in 2010 from 17.2 million bpd in 2009, contributing 20.4% and maintains no. 1 position worldwide followed by China, Russia, Japan and India.

Demand:
Crude oil fulfills world's 45% of energy demand. United states consume 18.9 million bpd approx 24% of total world crude oil consumption of 80.3 million bpd, stands at no 1 position followed by China's 8.43 million bpd, Japan's 4.43 million bpd and India 3.182 million bpd in 2010.

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Liquids fuel meets approx 45% of total world consumption of 495.5 quadruple mmbtu out of which residential consumes 50 q mmbtu, commercial consumers26.5qmmbtu, industrial consumes highest 184.4 quadruple mmbtu and transportation consumes 97.9 q mmbtu.

In terms of supply and demand OPEC and OECD has completely different scenario. OPEC has world's 80% crude oil reserve, it produce's 42%, refine's 10% and consumes just 8% and OECD's reserves are just 4%, It produces 19%, refines 52% and consumes highest in the world 55 % . In other terms OPEC is the net supplier and OECD is net consumer and this makes   both of them equally important.

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Indian Scenario
India boasts a growing economy, and is increasingly a significant consumer of energy. According to the International Energy Agency (IEA), coal/peat account for nearly 40 percent of India's total energy consumption, followed by nearly 27 percent for combustible renewable and waste. Oil accounts for nearly 24 percent of total energy consumption, followed by natural gas six percent, hydroelectric power almost 2 percent, nuclear nearly 1 percent, and other renewable less than 0.5 percent. Particularly Transport sector's end-use energy demand is expected to be increase rapidly.  India had approximately 5.6 billion barrels of proven oil reserves as of 2010, the second-largest amount in the Asia-Pacific region after China

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Total oil production in India was 877 thousand bpd and ranked 22 Position whereas India consumes 3.1 million bpd, and acquired 4th position in 2010 worldwide. The combination of rising oil consumption and relatively flat production has left India increasingly dependent on imports to meet its petroleum demand.  India's 70% crude demand is fulfilled by Middle East, primarily from Saudi Arabia, followed by Iran, Kuwait, and Iraq etc.

Top 5 Indian Oil Companies:
  1. India Oil Corporation
  2. Reliance Industries
  3. Bharat Petroleum Corporation
  4. Hindustan Petroleum Corporation
  5. Oil and Natural Gas Corporation

Factors influence Markets
  • Production of the major oil producing countries
  • Change in production/supply from OPEC or IEA 
  • Various climatic/hurricane or political supply fluctuations 
  • World oil demand 
  • Fluctuations in the value of dollar 
  • Imports from various world oil organizations like API, DOE 
  • Refinery fire 
  • Inventory release by NYMEX on every Wednesday

Major Exchanges in world
NYMEX
CME Group

Major Websites
www.eia.gov.in
www.cmegroup.com
www.ogj.com
www.opec.org
www.oecd.org
www. petroleum.nic.in
www.oilprice.com
www.oil.com
www.oil-price.net