OPEC basket, also known as the OPEC reference basket, is a weighted average of oil prices from selected 13 oil-exporting developing nations, also known as OPEC member countries. It is used as a critical crude oil benchmark to track the trend, stability, and oil prices. The basket holds a variety of crude, ranging from light to heavy, from various OPEC member countries.
OPEC refers to the Organisation of the Petroleum Exporting Countries. It is an intergovernmental association, which came into existence in September 1960 at the Baghdad Conference. The association was founded by five countries which were later joined by 11 additional nations. The target of the organisation is to facilitate and normalise the oil policies in member nations & balancing out oil costs in the worldwide market, protecting the smooth channelisation of oil from explorers to oil shoppers.
At present, the OPEC reference basket comprises member countries -- Iran, Iraq, Kuwait, Saudi Arabia, UAE, Algeria, Congo, Equatorial Guinea, Angola, Venezuela, Libya, Nigeria, and Gabon. Numerous nations all over the world also produce oil, but they are independent and are not the OPEC members. Russia, the US, China, and Canada are the four most significant oil producers who are not the OPEC members.
The OPEC Reference Basket of crudes
Kalkine Constructed Table, Source: Opec.org
According to OPEC Share of World Crude Oil Reserves 2018, the OPEC members host around 79.4% of world's proven oil reserves with about 64.5% of them situated in the Middle East. The net expansion in total production during 2009-2018 by the Non-OPEC nations was 24.6 billion barrels. Conversely, it was 186.2 billion barrels for the OPEC nations.
Kalkine Constructed Image, Source: Opec.org
From 2002 to 2019, costs of the OPEC Reference Basket oils varied significantly. For instance, Saharan Blend from Algeria remained at about US$25 per barrel in 2002. After 10 years, this figure had expanded to over US$111, before diminishing to US$64.49 in 2019.
Plummeting prices and recovery
Prices started to increase from the 2008 worldwide financial crisis and reached on top in 2012, preceding a significant decline. In 2014, the average annual price of the OPEC crude oil dropped by almost half due to surplus supply of crude oil in the market. From then, recovery has been progressive. However, the OPEC prices are not expected to go back to the levels of the initial 2010s in the next two decades.
Shale oil overproduction
The 2010s’ oil excess was caused to some extent due to the upgraded production of domestic heightening shale and tight oil in the United States. It happened after the improvement of pressure-driven hydraulic fracturing as an extraction technique in the wake of the worldwide downturn. Despite the fact that almost 80% of global oil stores are found in the OPEC nations, the United States has become the biggest producer of oil globally in last 10 years.
What is Data Mining? Data mining is a process that facilitates the extraction of relevant information from a vast dataset. The process helps to discover a new, accurate and useful pattern in the data to derive helpful pattern in data and relevant information from the dataset for organization or individual who requires it. Key Features of data mining include: Based on the trend and behaviour analysis, data mining helps to predict pattern automatically. Predicts the possible outcome. Helps to create decision-oriented information. Focuses on large datasets and databases for analysis. Clustering based on findings and a visually documented group of facts that were earlier hidden. How does data mining work? The first step of the data mining process includes the collection of data and loading it into the data warehouse. In the next step, the data is stored and managed on cloud or in-house servers. Business analyst, data miners, IT professionals or the management team then extracts these data from the sources and accordingly access and determine the way they want to organize the data. The application software performs data sorting based on user’s result. In the last step, the user presents the data in the presentable format, which could be in the form of a graph or table. Image Source: © Kalkine Group 2020 What is the process of data mining? Multiple processes are involved in the implementation of data mining before mining happens. These processes include: Business Research: Before we begin the process of data mining, we must have a complete understanding of the business problem, business objectives, the resources available plus the existing scenario to meet these requirements. Having a fair knowledge of these topics would help to create a detailed data mining plan that meets the goals set up by the business. Data Quality Checks: Once we have all the data collected, we must check the data so that there are no blockages in the data integration process. The quality assurance helps to detect any core irregularities in the data like missing data interpolation. Data Cleaning: A vital process, data cleaning costumes a considerable amount of time in the selection, formatting, and anonymization of data. Data Transformation: Once data cleaning completes, the next process involves data transformation. It comprises of five stages comprising, data smoothing, data summary, data generalization, data normalization and data attribute construction. Data Modelling: In this process, several mathematical models are implemented in the dataset. What are the techniques of data mining? Association: Association (or the relation technique) is the most used data mining technique. In this technique, the transaction and the relationship between the items are used to discover a pattern. Association is used for market basket analysis which is done to identify all those products which customer buy together. An example of this is a department store, where we find those goods close to each other, which the customers generally buy together, like bread, butter, jam, eggs. Clustering: Clustering technique involves the creation of a meaningful object with common characteristics. An example of this is the placement of books in the library in a way that a similar category of books is there on the same shelf. Classification: As the name suggests, the classification technique helps the user to classify and variable in the dataset into pre-defined groups and classes. It uses linear programming, statistics, decision tree and artificial neural networks. Through the classification technique, we can develop software that can be modelled so that data can be classified into different classes. Prediction: Prediction techniques help to identify the dependent and the independent variables. Based on the past sales data, a business can use this technique to identify how the business would do in the future. It can help the user to determine whether the business would make a profit or not. Sequential Pattern: In this technique, the transaction data is used and though this data, the user identifies similar trends, pattern, and events over a period. An example is the historical sales data which a department store pulls out to identify the items in the store which customer purchases together at different times of the year. Applications of data mining Data mining techniques find their applications across a broad range of industries. Some of the applications are listed below: Healthcare Education Customer Relationship Management Manufacturing Market Basket Analysis Finance and Banking Insurance Fraud Detection Monitoring Pattern Classification Data Mining Tools Data mining aims to find out the hidden, valid and all possible patterns in a large dataset. In this process, there are several tools available in the market that helps in data mining. Below is a list of ten of the most widely used data mining tools: SAS Data mining Teradata R-Programing Board Dundas Inetsoft H3O Qlik RapidMiner Oracle BI
Measure of the value of the American dollar against the currencies of a group of America's important trade partners is referred to as U.S. Dollar Index (USDX). The basket of the currencies includes Swiss Franc, British Pound, Euro, Swedish Krona, Canadian Dollar and Japanese Yen.
What is OPEC? OPEC stands for Organization of the Petroleum Exporting Countries. It is an intergovernmental organisation formed in September 1960 at the Baghdad Conference held from 10-14 September 1960. The headquarters of OPEC is located in Vienna since 1965. Before 1965 it had its headquarters in Geneva, Switzerland. At the initial stage, the organisation was formed by five founding member countries, later joined by eleven more members. At present, there are 13 member countries as of January 2021. Data as on January 2021, Image Data Source: OPEC As per the statute of OPEC any country can opt for the membership, the primary condition being the nation must be a net exporter of oil and the thoughts of the nation ought to be like OPEC. As per the OPEC website, Member countries houses around 79.4% of the world proven oil reserves, with around 64.5% located in the Middle East. The net addition in cumulative production during 2009-2018 by Non-OPEC countries was 24.6 billion barrels. In contrast, it was 186.2 billion barrels for OPEC countries, far ahead than Non-OPEC countries. Why was OPEC formed? OPEC was formed during the international economic transition phase when extensive decolonisation was taking place. The international oil market was monopolised by certain big players present in the market till 1970. The syndicate's objective is to coordinate and standardise the petroleum policies in member countries for stabilising oil prices in the international market, safeguarding the smooth supply of oil to petroleum consumers and appropriate returns for suppliers in the global market. Who are the decision-makers in OPEC? OPEC Secretariat is the apex body which regulates the organisation. It is also responsible for executing all resolutions and decision making related to oil prices, production and related issues. The organs of the organisation pass the decision. The three organs are The Conference, The Board of Governors and The Secretariat. Image Data Source: OPEC The Conference is the supreme authority of the organisation, which consists of representative delegations from member countries. Each member has one vote, and a quorum of a three-quarter member is necessary for holding a conference. The Board of Governors consists of governors nominated by Member Countries and confirmed by the Conference. It is responsible for managing the organisation, convening the Conference and drawing up the annual budget. The Secretariat carries outs the executive functions of the syndicate following the directions of Board of Governors and provisions of the statute. The Secretariat consists of a Secretary-General, who is appointed as the Organization's Chief Executive Officer by the Conference for three years. It further comprises the Office of the Secretary-General, the Legal Officer, the Research Division and the Support Services Division.
Penny stocks are the stocks traded at a low price, issued by companies having lower market capitalization than others. These stocks are listed on smaller exchanges and are issued by companies that possess fewer assets and have small business operations or have been in business for a significantly less amount of time. Different countries may give different price points below which stocks are considered penny stocks. The specification to define a penny stock may not be the same across countries. For instance, in the US stocks priced under US$5 are counted as penny stocks while for the UK, the stocks traded for less than £1 are counted as penny stocks. Penny stocks may also be associated with companies that had earlier been well-functioning firms. A majority of penny stocks are traded over-the-counter (OTC) with a few being traded on the prominent stock exchanges. What are the characteristics of penny stocks? A company’s market capitalisation is determined by multiplying the net asset value of the shares and the number of outstanding stocks. Based on this, companies are ranked, and since penny stocks belong to low market cap companies, they usually lie on the lower rung of stock exchanges. Since penny stocks are associated with small companies, they might experience a lack of buyers in the marketplace. Thus, penny stocks may be less liquid than other types of stocks as there are less individuals willing to purchase them. Their low pricing is what sets them apart from other stocks in the exchanges. This low pricing allows for greater number of shares to be purchased at a single time. Stock exchanges put these stocks under “trade-to-trade” basket as they are highly risky investments. Under this basket no intra-day trading is allowed and transactions must be completed on gross basis. This means that shares must be delivered on the same day by the seller and received by the buyer. Why are the advantages of penny stocks? Penny stocks may seem like risky investments, however, there is a reason why they are listed on exchanges. It is possible to gain huge returns by investing carefully in penny stocks. Here are incentives offered by penny stocks: Possibility of high returns: Some penny stocks may include new companies or start ups that have the potential to blow up over time. The penny stocks that have the potential to double, triple or quadruple one’s investment are called multibaggers. These stocks can be purchased in high volumes at a low rate and could bring significant profits when prices increase. Thus, certain penny stocks may hold the potential to outperform mid-cap and large-cap stocks. Benefits to Small companies: Penny stocks are issue by small companies, thus making them available for public funding, an access that would not have been available to them otherwise. Low price point: Since these stocks are inexpensive, it can allow traders who do not hold substantial amount of cash to invest in them. However, it is important to note that penny stocks may prove to be quite risky as they are highly volatile. What are the risks associated with penny stocks? Penny stocks are high risk stocks that must be invested in with careful prior judgement. There are various reasons why these are prone to price fluctuations, these include: Lack of historic information: Since many of the penny stocks are new or low cap companies, there may be a lack of information about these companies and the trend followed by their share prices. This makes investing in these companies a risky venture. No minimum listing criteria: Those penny stocks are the traded OTC may not be required to surpass any minimum listing requirement for the same. Susceptible to Fraud: These stocks are highly susceptible to frauds and scams. Since these are less liquid, investors can get the change to rig the market and manipulate the prices. This does not give an actual representation of the value of the company’s shares. Sudden delisting: Another aspect that makes penny stocks highly volatile is that they may be delisted anytime without prior information as they belong to companies that are not performing very well. Thus, investors might end up losing their money.