Page 50 - MEX-Yearbook-2017

Commodity Insights

Crude Oil

Introduction hydraulic fracturing or fracking.
If you think of oil mainly as fuel to power cars, trains, • Shipping availability, freight rates, market trading
jets, and ships, you’re only seeing a tiny piece of the activities and strategies influence international crude oil
puzzle. Oil is a major component in the manufacture prices.
of plastics, synthetic textiles, fertilizer, computers, • Short term decision of the oil producing countries,
cosmetics, and even steel. In fact, less than half of a changes in economic conditions or sentiment in both the
42-gallon barrel of oil actually goes to fuels production; short and longer term, investment in new oil production/
the rest is used to make consumer goods. It’s estimated refining capacity affects crude oil prices.
that the average American uses about three gallons of petroleum products • World’s oil prices move together due to arbitrage and it may cause
per day. inflation and affects the pricing of almost everything.
Although the market for oil is global, oil trading has clustered around
several primary regions. The crude oil in each of these regions has slightly OPEC Proven Crude Oil reserves, at end of 2016
different characteristics, typically referred to in terms of viscosity (light According to current estimates, 81.5% of the world’s proven crude oil
versus heavy) and sulfur content (sweet versus sour). Each of the major reserves are located in OPEC Member Countries, with the bulk of OPEC oil
trading regions has established benchmarks to track price movements in reserves in the Middle East, amounting to 65.5% of the OPEC total.
oil commodities. OPEC Member Countries have made significant additions to their oil
Crude oil is one of the better commodities to trade. It is a very active reserves in recent years, for example, by adopting best practices in the
market and it is well known with investors around the world. There is industry, realizing intensive explorations and enhanced recoveries. As
usually no shortage of news to cause the price of oil to move from day to a result, OPEC’s proven oil reserves currently stand at 1,216.78 billion
day. This presents many good trading opportunities, whether you focus on barrels.
day trading futures or you are a longer-term trader or investor.
Non-OPEC OPEC
Fundamental Facts 275.38 billion 1,216.78 billion
• The biggest reserve of crude oil is in Venezuela, Saudi Arabia,
barrels barrels
Canada, Iran, and Iraq respectively. 18.5% 81.5%
• The major oil producing countries are Russia, Saudi Arabia, United
Venezuela Saudi Arabia IR Iran Iraq Kuwait
States, Iran, and China. UAE Libya Nigeria Qatar
• The USA is the world’s largest consumer of crude oil followed by Algeria Angola Ecuador Gabon

China, Japan, India, and Russia.
• OPEC produces about 40% of world’s crude oil and OPEC’s oil

export represents the 60% of world’s crude oil exported or traded
internationally.
• The new technological process of extraction of oil used is known as

49 | MEX NEPAL YEAR BOOK 2017