Introduction of Crude Oil

Introduction

Crude oil is a complex mixture of various hydrocarbons found in the upper layers of the earth's crust. Crude oil is often attributed as the “Mother of all Commodities” because of its importance in the manufacturing of a wide variety of materials. Crude oil accounts for 35% of the world's primary energy consumption. Crude oil is used to produce fuel for cars, trucks, airplanes, boats and trains. It is also used for a wide variety of other products including asphalt for roads, lubricants for all kinds of machines; plastics for toys, bottles, food wraps, among others. Global Scenario Global proven oil reserves in 2011 was around 1652.6 thousand million barrels, of which the OPEC had 1196.3 thousand million barrels. Crude oil accounts for 33% of the world's primary energy consumption. Global oil demand was 88.3 million barrels per day (mmb/d) in 2011, an increase of around 0.7% from the previous year. In 2010, Russia, Saudi Arabia, the US and Iran were the top oil producing countries. Although the US is the world's third largest oil producing nation, it is the world's largest consumer and importer of oil followed by China, Japan and India. Indian Scenario Oil accounts for 29% of India's total energy consumption and there seems to be no possibility of scaling down the dependence on these fuels. Crude oil production during the period April-March 2012 (provisional) was 38.19 million metric tonne (MMT), as compared with 37.71 MMT during the corresponding period last year. The total oil consumption in 2010 was around 3.34 mmb/d. India is the fourth largest consumer of oil and imports more than 70% of its crude oil requirement. India's refining capacity stood at 193.39 MMTPA on January 1, 2012 of which 116.89 MMT is in the public sector, 6.00 MMT in joint ventures, and the balance 70.50 MMTPA in the private sector. The Government of India realised the need to explore more areas and has implemented New Exploration Licensing Policy (NELP), according to which 100% FDI is permitted for small and medium sized oil fields through competitive bidding. Price Moving Factors OPEC output, supply and spare capacities Increased demand from emerging and developing countries; geopolitics US crude and products inventories data Currency fluctuations Weather conditions Speculative buying and selling Changes in the refining sector, for example, a drop in the refinery utilisation rate