Crude Oil WTI73.11 USD/bbl 0.28 (0.38%) (Last updated - January 18, 2024 07:48 AM UTC )
61.56 - 130.5
January 18, 2024 07:48 AM UTCData Powered by Stockdio. Data delayed by 5 minutes unless otherwise indicated.
It was in the early part of the 20th century when oil started to replace coal as the main form of fuel. Sooner steam engines were replaced by internal combustion engines, and crude oil gained the status of the most vital fuel among all energy sources. Billions of dollars started flowing in projects worldwide to discover the next big reserves.
Crude oil is a naturally occurring yellow-to-black flammable liquid hydrocarbon substance found beneath the Earth’s surface. These liquid hydrocarbons are formed due to the constant accumulation of organic substances over millions of years in geological ‘kitchen’ in subsurface structures. The sediments are subjected to heat and pressure by overlying rocks and gradually convert the organic sediments into crude oil. The process is referred to as ‘cooking’ by petroleum geologists, and the type of cooking decides the final product, be it natural gas, crude oil or coal.
Crude oil has been the centre of geopolitics for many decades now. It is one of the most traded commodities around the world, but there are very few producers. Almost 40% of the global supply is produced by a handful of nations from the OPEC+ pack. The United States, Canada, China, and few African countries are the major producers outside OPEC+.
Crude oil prices are highly volatile, and trends could reverse overnight. Some of the major factors influencing the price of crude oil are:
- Demand and supply
- U.S stockpile data
- OPEC+ policies
- War and conflict in the Middle East or OPEC+ countries
- Policy shift of major oil-consuming countries
ASX Crude Oil WTI companies
Frequently Asked Questions
Pricing of crude oil depends on several factors, including demand, supply and quality of crude oil. Two of the most important quality parameters of crude oil are its specific gravity and sulphur content. Specific gravity is relative density with respect to water. Low density and low-sulphur content crude oil fetches higher prices in the market. Higher sulphur content increases the risk of corrosion of the piping and equipment through which it is passed during the refining process.
Brent and WTI crude oil are used as benchmarks to rate the quality of crude oil produced from other countries or regions and are priced accordingly. Brent and WTI crude oil have a sulphur content of less than 0.5% and API (American Petroleum Institute) gravity of less than 40.
API Gravity = 141.5/ (S.G at 600)– 131.5
S.G is the specific gravity of crude oil
The oil produced in any region is priced according to its API gravity and sulphur content with respect to benchmark crude oil.
Oil prices are driven by the demand and supply variables in the market. Traders go for future contracts to hedge their crude oil purchases/investments. Oil futures are derivative instruments that can be traded on exchanges and are often used by traders and oil companies to keep them safe from a sudden spike in prices.
Oil futures are like any other futures contract, traders agree to take the delivery of crude oil on a fixed date in exchange for a set contract price. The positions could be sold out at any time before the expiry date of the contract. If it is not squared off, then the buyer of the contract has to take the delivery of crude oil.
Crude oil is traded in physical quantities in the ‘spot market’ in near-term delivery contracts. The prices in the spot market are highly volatile as they are traded for a short term. In the spot market, mostly refiners and traders who deal in crude oil trade as they can take the physical delivery.
The payment terms and prices depend on the factors such as currency and relationships between countries. The countries which are in good books fetch favourable prices of their crude oil than the countries whose assets are under the control of extremists.
1. Paint industry – petroleum and its derivatives are used as raw materials for the industry.
2. Tyres - petroleum and its derivatives are used as raw materials in the manufacturing of tyres.
3. Aviation industry – Costlier crude oil will lead to price rise in jet fuels.
4. Auto – Higher fuel prices may negatively impact the sales.
5. Cement industry- Uses petroleum products in very little quantity, however, the cost of shipping the final products is heavily influenced by the crude oil prices.
The United States of America was the largest crude oil producer in the year 2020. The USA produced 17.62 million barrels of crude oil every day on an average in the year 2020. Russia secured the second position with 10.6 million barrels/ day followed by Saudi Arabia with 9.2 million barrels/day. However, when it comes to reserves, Venezuela holds the worlds’ largest known reserve, estimated at around 3 billion barrels of crude oil. This is around 18% of the total world’s reserve.