RAVI SHANKAR TIWARI International College of financial planning 2014-15

What is crude Oil?

• A naturally occurring, unrefined petroleum product composed of hydrocarbon deposits.

• It is often called as "black gold”.

Leading producers of crude oil in the World.

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USA SAUDIARABIA

RUSSIA CHINA CANADA IRAN IRAQ UAE MEXICO KUWAIT

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OPEC ORGANISATION OF PETROLEUM EXPORTING COUNTRIES.

LIST OF COUNTRIES IN OPEC.

ALGERIA

ANGOLA

ECUADOR

IRAN

KUWAIT

LIBYA

NIGERIA

SAUDI ARABIA

UNITED ARAB EMIRATES

VENEZUALA

Leading Consumers of crude oil in the world.

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USA CHINA JAPAN RUSSIA INDIA BRAZIL SOUTHAFRICA

CANADA GERMANY SOUTHKOREA

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DATA:USA ENERGY INFORMATION ADMINISTRATION,2013 THOUSANDS BARREL PER DAY

Crude Oil Benchmarks

• A benchmark crude or marker crude is a crude oil that serves as a reference price for buyers and sellers of crude oil.

• There are three primary benchmarks,West Texas Intermediaries(WTI),Brent Blend and

Dubai Crude.

BRIEF DESCRIPTION OF BENCHMARKS

• WTI-West Texas Intermediaries is used primarily in the U.S.

• BRENT CRUDE-Brent crude is used primarily in Europe and in the OPEC market basket which is used around the world. This benchmark is a mix of crude oil from 15 different oil fields in the North sea.

• Dubai crude-It is also known as Fateh, most of the oil producers in the Middle East have taken the monthly spot price average of Dubai and Oman as the benchmark for sales to the Far East.

• Other well known benchmarks are-

The OPEC basket refernce used by OPEC.

Tapis crude which is traded in Singapore.

Oil Industry

Present scenario

Crude oil price has dropped significantly from June -2014 till date.It had risen upto $115 per barrel and now around $55-60 per barrel,volatality is still there.

Reasons behind the fall in crude oil price:

Fall in growth rate of chinese economy.

Eurozone crisis especially because of greece.

Rise in the production of shale oil and gas in USA.

OPEC’s decision of not cutting the crude oil production. In a nutshell supply is being more than its actual demand.

Advantages for India

Current account deficit has improved.Based on CRISIL report,it was estimated that every $10 decline in average oil price has reduced CAD by $10-12 billion.

Various monetary policy has been implemented in order to bring down the inflation.

Interest rate has gone down.

Many industry dependent oil crude oil has been also benefited immensely such as,paint,tyre, etc...

Disadvantages for india

Fall in price has helped India in reducing the import bill but it has also affected the export significantly.

OPEC,Russia,Columbia,Canada and Mexico accounts for 20% of merchandise export of India,OPEC alone stands for 18.4% of India’s export.

Slowdown in expected growth rate of China,weak Eurozone and Japan have created concern for India.These countries accounts for 20% of India’s export

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