Hundreds of different types of crudes are traded across the world-161 to be precise, according to the International Crude Oil Market Handbook, 2004 published by the Energy Intelligence Group. However, more than half of the oil traded is priced against just two benchmarks-the Brent and the WTI.
West Texas Intermediate or WTI crude oil is of very high quality. With an API gravity measuring 39.6 degrees and sulphur content as low as 0.24 percent, WTI is classified as a ''light'', ''sweet'' crude oil.
Physical WTI represents crude oil delivered at the pipeline terminus at Cushing Oklahoma.
Crude oil is a mixture of hydrocarbons that exists in a liquid phase in natural underground reservoirs. 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.
The prices of crude are highly volatile. High oil prices lead to inflation that in turn increases input costs; reduces non-oil demand and lower investment in net oil importing countries.
Categories of Crude oil
West Texas Intermediate (WTI) crude oil is of very high quality. Its API gravity is 39.6 degrees (making it a "light" crude oil), and it contains only about 0.24 percent of sulphur (making a "sweet" crude oil). WTI is generally priced at about a $2-4 per-barrel premium to OPEC Basket price and about $1-2 per barrel premium to Brent, although on a daily basis the pricing relationships between these can very greatly.
Brent Crude Oil stands as a benchmark for Europe.
India is very much reliant on oil from the Middle East (High Sulphur). The OPEC has identified China & India as their main buyers of oil in Asia for several years to come.
Crude Oil Units (average gravity)
1 US barrel = 42 US gallons.
1 US barrel = 158.98 litres.
1 tonne = 7.33 barrels .
1 short ton = 6.65 barrels .
Note: barrels per tonne vary from origin to origin.
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 (5.6 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.
OPEC fact sheet
OPEC stands for 'Organization of Petroleum Exporting Countries'. 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.
Market Influencing Factors
OPEC output and supply.
Terrorism, Weather/storms, War and any other unforeseen geopolitical factors that causes supply disruptions.
Global demand particularly from emerging nations.
DOE / API imports and stocks.
Refinery fires & funds buying.
Exchanges dealing in Crude Futures
The New York Mercantile Exchange (NYMEX)
The International Petroleum Exchange of London (IPE).
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