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Crude oil Report

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  1. 1. HEDGE EQUITIES CRUDE OIL REPORT 0 HEDGE COMMODITIES RESEARCH REPORT CRUDE OIL 2011
  2. 2. HEDGE EQUITIES CRUDE OIL REPORT 1 Contents Crude oil .................................................................................................................................................................................................................................2 Important Facts & Figures: .............................................................................................................................................................................................3 Top oil producing countries.............................................................................................................................................................................................4 Top oil consuming countries ...........................................................................................................................................................................................4 Crude Database ...................................................................................................................................................................................................................5 Worlds biggest oil reserves............................................................................................................................................................................................6 Fundamental Factors affecting crude oil prices.......................................................................................................................................................7 United States ........................................................................................................................................................................................................................8 China........................................................................................................................................................................................................................................9 India .......................................................................................................................................................................................................................................10 Strategic petroleum reserves...................................................................................................................................................................................11 Refining sector in India...............................................................................................................................................................................................12 Japan......................................................................................................................................................................................................................................13 Important Checkpoints of Sea route for oil trade ................................................................................................................................................14 Crude Outlook.....................................................................................................................................................................................................................15 Analyst notes & updates.................................................................................................................................................................................................15
  3. 3. HEDGE EQUITIES CRUDE OIL REPORT 2 Crude oil Oil plays an important role in the economic activity of any country. Crude oil is a liquid found in natural underground reservoirs and is burned to create energy. Crude oil and its by products are used as raw materials or input in various manufacturing industries and the products obtained are petrol, Liquid petroleum gas, naptha, kerosene, gas oil and fuel oil. Crude oil are classified according to API gravity which is American Petroleum Institute and it has mentioned the gravity level a measure of heavy or light a petroleum liquid when compared to water. If the oil has higher API gravity it is considered as light and if less gravity level it is considered as sour or heavy. The three primary benchmarks of oil in world trade are West Texas Intermediate (WTI), Brent Blend and Dubai & Oman. West Texas Intermediate (WTI): West Texas Intermediate commonly called as WTI is used primarily in U.S. It is light (API gravity) and sweet (low sulphur) making it ideal for producing products like low sulphur gasoline and low sulphur diesel. Brent is not light or sweet as WTI but still high grade crude and WTI typically trades at higher premium than Brent. Brent crude: Brent Crude is the largest of the many major classifications of crude oil and is used to price two thirds of the worlds internationally traded crude oil supplies. Brent crude is sourced from North Sea (of Atlantic Ocean located between Great Britain and Scandinavia). Petroleum production from Europe, Africa and the Middle East flowing towards west tends to priced relative to this Brent which acts as a benchmark. Dubai Crude: Dubai Crude is a light sour crude oil extracted from Dubai. Dubai crude is used as a price benchmark because it is one of few Persian Gulf crude oil. Dubai crude is generally used for pricing Persian Gulf crude oil exports to Asia. The Dubai benchmark is also known as Fateh is used in the United Arab Emirates. For many years, most of the oil producers in the Middle East have taken the monthly spot price average of Dubai & Oman as the bench mark for sales to the Far East. Prices of Brent & WTI oil in US dollars quoted for a barrel
  4. 4. HEDGE EQUITIES CRUDE OIL REPORT 3 Important Facts & Figures: The world crude oil & liquid fuels consumption grew to 86.7 mbpd in 2010 surpassing the previous record of 86.3 mbpd set in 2007. Energy Information administration (EIA) expects that the world liquid fuels consumption to grow by 1.4mbpd in 2011 and in 2012 by 1.6 mbpd, resulting in total world consumption of 89.7 mbpd in 2012. Countries outside the Organization for Economic cooperation and development (OECD) such as China, Brazil and Middle East will drive the growth in consumption of oil, along with OECD members US & Canada in next two years, offsetting declines in Europe and Japan. Source: BP Statistical Review of World Energy, Hedge Research Non OPEC countries produced 33.67 mbpd as of 2009 and according to EIA, Non OPEC crude oil and liquid fuels production will increase by 690,000 barrels per day (bpd) in 2011 and 420,000 bpd in 2012, mainly contributed by Brazil, Canada & China. Other Non OPEC areas are expected to decline, including a decrease in European and North Sea production of 130,000 bpd in 2011 and further decrease of 200,000 bpd in 2012. EIA expects that OECD onshore inventories will decline in 2011 following the steep drop in floating storage that has already occurred. Projected onshore OECD stocks fall by about 20 million barrels in 2011, followed by an additional 54 million barrel decline in 2012. Days of supply (total inventories divided by average daily consumption) drops from a relatively high 58.1 days during the fourth quarter of 2010 to 57.0 days in the fourth quarter 2011, and 55.7 days of supply in the fourth quarter 2012. Source: BP Statistical Review of World Energy, Hedge Research
  5. 5. HEDGE EQUITIES CRUDE OIL REPORT 4 Top oil producing countries Russia is the leading producer of oil pumping close to 10 million barrels per day, with reserves close of 77.4 billion barrels. The country with high amount of reserves is Saudi Arabia which has 264.5 billion barrels and high reserve life. It is forecasted that United States will consume all its reserves in other 10 years. In future United States may increase their dependence on Middle East which has close to 56% of the world reserves unless US finds other source of energy to meets its demand. Source: BP Statistical Review of World Energy, Hedge Research Top oil consuming countries United States is the leading consumer of oil with 19.14 million barrels per day in 2010. China is far behind US in consumption. But China has doubled its consumption in the last decade and is expected to increase its consumption aggressively in next two decades. Japan has been the third largest importer of oil, as the country lacks energy reserves & with many number manufacturing company and oil refineries. Japan will continue to import in order to meet its demand. India is quite significantly increasing its oil imports as the economy is growing at faster pace than the world economy. Source: BP Statistical Review of World Energy, Hedge Research
  6. 6. HEDGE EQUITIES CRUDE OIL REPORT 5 Crude Database Source: BP Statistical Review of World Energy, Hedge Research
  7. 7. HEDGE EQUITIES CRUDE OIL REPORT 6 Worlds biggest oil reserves In Billion Barrels 2010 Daily Oil statistics in Barrels 2010 Country Proven Oil reserves Proportionate to World Total Total Oil production in Million Consumption Exports to U.S 1 Saudi Arabia 264.5 19.10% 10.00 2.81Mn 1.09m Dec (2010) 2 Venezuela 211.2 15.3% 2.47 765,000 3 Canada 175.2 12.94% 3.33 2.27mn 2.53m Dec (2010) 4 Iran 137.6 9.9% 4.24 1.79mn NIL Dec (2010) 5 Iraq 115 8.30% 2.46 636,000 336000 Dec (2010) 6 Kuwait 101.5 7.30% 2.50 413,000 125,000 Dec (2010) 7 UAE 97.8 7.10% 2.81 682,000 10,000 Dec (2010) 8 Russia 77.4 5.60% 10.27 3.19mn 756,000 Dec (2010) 9 Libya 46.4 3.4% 1.65 264,000 66000 Dec (2010) 10 Kazakhastan 39.8 2.9% 1.75 262,000 21000 Dec (2010) 11 Nigeria 37.2 2.70% 2.40 272,000 1.07 m Dec (2010) 12 U.S.A 30.9 2.2% 7.51 19.14mn - - 13 Qatar 25.9 1.9% 1.56 220,000 16000 Dec