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INTRODUCTION
Crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons. Oil and gas account for about 60 per cent of the total world's primary energy consumption. Almost all industries including agriculture are dependent on oil in one way or other.
Oil & lubricants, transportation, petrochemicals, pesticides and insecticides, paints, perfumes, etc. are largely and directly affected by the oil prices. Aviation gasoline, motor gasoline, naphtha, kerosene, jet fuel, distillate fuel oil, residual fuel oil, liquefied petroleum gas, lubricants, paraffin wax, petroleum coke, asphalt and other products are obtained from the processing of crude and other hydrocarbon compounds.
ENERGY CONSUMPTION
The geographic location is important because it affects transportation costs to the refinery. Light crude oil is more desirable than heavy oil since it produces a higher yield of petrol sweet oil commands a higher price than sour oil because it has fewer environmental problems Each crude oil has unique molecular characteristics which are understood by the use of crude oil assay analysis in petroleum laboratories.
CONTRACT SPECIFICATIONS OF CRUDE OIL Symbol Description No. of contracts a year Contract Duration CRUDE OIL CRUDE OIL MMMYY 12 3 months TRADING Trading period Trading sessions Trading unit Monday through Saturday Monday to Friday: 10.00 am to 11.30 pm Saturday: 10.00 am to 2.00 pm 100 barrels
10,000 barrels
Re.1 4% Rs. per barrel, Ex- Mumbai (excluding all taxes, levies and other expenses) 5% In case of additional volatility, a special margin as deemed fit, will be imposed immediately on both the buy and sell side in respect of all outstanding position, which will remain in force for next 2 days, after which the special margin will be relaxed. For individual clients: 4,00,000 barrels. For a member collectively for all clients: 12,00,000 barrels or 15% of the open market position, whichever is higher. DELIVERY
Delivery unit
Delivery center(s)
Light Sweet Crude Oil confirming to the following quality specification is deliverable: Sulphur : 0.42% by weight or less API Gravity: Between 37-42 degrees All volumes are defined at 60 degrees Fahrenheit
5% In case of additional volatility, a special margin as deemed fit, will be imposed immediately on both the buy and sell side in respect of all outstanding position, which will remain in force for next 2 days, after which the special margin will be relaxed. For individual clients: 1,00,000 barrels; For a member collectively for all clients: 25% of the open market position.
DELIVERY Delivery unit Delivery center(s) 50,000 barrels with + / - 2% tolerance limit. Port installation at Mumbai / JNPT QUALITY SPECIFICATIONS Middle east south sour crude oil either of Dubai or Oman origin with the following specification: Sulphur : 2.05% by weight or less API Gravity: Between 31-37%
OPEC
'Organization of Petroleum Exporting Countrieswas founded in 1960 in baghdad. It is an organization of eleven developing countries that are heavily dependent on oil revenues as their main source of income. The current Members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
OPEC controls almost 40 percent of the world's crude oil. It accounts for about 75 per cent of the world's proven oil reserves. Its exports represent 55 per cent of the oil traded internationally. The OPEC has identified China & India as their main buyers of oil in Asia for several years to come.
INDIAN SCENARIO
India ranks among the top 10 largest oilconsuming countries. Oil accounts for about 30 per cent of India's total energy consumption. The country's total oil consumption is about 2.2 million barrels per day. India imports about 70 per cent of its total oil consumption and it makes no exports. India faces a large supply deficit, as domestic oil production is unlikely to keep pace with demand. India's rough production was only 0.8 million barrels per day.
The oil reserves of the country (about 5.4 billion barrels) are located primarily in Mumbai High, Upper Assam, Cambay, KrishnaGodavari and Cauvery basins. India had a total of 2.1 million barrels per day in refining capacity. Government has permitted foreign participation in oil exploration, an activity restricted earlier to state owned entities. IOCL is the largest refinery co. in india. RPLs jamnagar refinery is the largest in india and third largest in world.
Transporters and Airline companies can hedge the risk of rising Diesel/Petrol prices by taking a hedge in Crude Oil futures .
MCX is providing a platform for all the above categories of businesses and the common man. The Crude Oil contracts would be attractive for those who want to hedge for their business requirements as well as for those who want to seek cover against rising inflation.
GLOBAL SCENARIO
Oil accounts for 40 per cent of the world's total energy demand. The world consumes about 76 million bbl/day of oil. United States (20 million bbl/d), followed by China (6.9 million bbl/d) and Japan (5.4 million bbl/d) are the top oil consuming countries. Balance recoverable reserve was estimated at about 142.7 billion tones (in 2002), of which OPEC was 112 billion tones
Top World Oil Producers, Exporters, Consumers and Importers, 2004 (in millions of barrels per day)
Sr. No Producers Total Oil Production
10.37
Exporters
Consumers
Importers
Saudi Arabia Russia USA Iran Mexico China Norway Canada Venezuela UAE Kuwait Nigeria UK
Saudi Arabia Russia Norway Iran Venezuela UAE Kuwait Nigeria Mexico Algeria Iraq Libya Kazakhstan
USA
USA
2 3 4 5 6 7 8 9 10 11 12 13
9.27 8.69 4.09 3.83 3.62 3.18 3.14 2.86 2.76 2.51 2.51 2.08
6.67 2.91 2.55 2.36 2.33 2.2 2.19 1.8 1.68 1.48 1.34 1.06
China Japan Germany Russia India Canada Brazil South Korea France Mexico
6.5 5.4 2.6 2.6 2.3 2.3 2.2 2.1 2.0 2.0
Japan China Germany South Korea France Italy Spain India Taiwan
USD 39,780
USD 4,420
USD 12,825
34.46%
IS IT WORTH INVESTING?
MERITS
High Liquidity Internationally Easy Trading Concept. High Profitability Levels Round-The-Clock Trading Leverage
DEMERITS
High volatility
Sensitivity top several factors Threats from substitutes High risk.
CONCLUSION
Crude Oil is one of the most liquid and interesting commodities in the financial world. As Crude oil, trading carries high profit along with significant risk. Every individual trader can buy and sell these contracts with an investment as little as $1,000. The only thing you need is a lot of discipline and a strong stomach; oil trading is extremely volatile and youll be in for a bumpy ride!
BIBLIOGRAPHY
www.wtrg.com/daily/crudeoilprice.html www.futurescrude.com/ www.oilscenarios.info/oilbasics.htm www.theoptionsguide.com/crude-oil-futureslong-hedge.aspx www.crudeoiltrade.com/ www.mcxindia.com
PRESENTED BY:
AISHWARYA BALAKRISHNAN RIDDHI BAVISHI TWINKLE CHHADWA RIYA JAIN SHEFALI SAVLA MITU SOMANI JAGRUTI VORA 01 06 08 14 36 45 51
THANK YOU!!!