Crudeoil.pdf

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RUDE OIL

INTRODUCTION! Crude oil is a complex mixture of various hydrocarbons found in the upper layers of the earth's crust.! Crude oil is often attributed as the “Mother of all Commodities” because of its importance in the

manufacturing of a wide variety of materials.! Crude oil accounts for 35% of the world's primary energy consumption.! Crude oil is used to produce fuel for cars, trucks, airplanes, boats and trains. It is also used for a wide

variety of other products including asphalt for roads, lubricants for all kinds of machines; plastics for toys,bottles, food wraps, among others.

VARIETIES

A) West Texas Intermediate

B) Brent Crude Oil

C) Middle East Crude Oil

Two factors that determine the market value of a specific grade of crude oil are density (measured inAmerican Petroleum Institute (API) gravity) and the sulphur content, respectively, which are representative ofhow light and sweet is the crude oil.

A high–quality crude oil explored and physically traded in the US, West Texas Intermediate is one of thelargest traded commodities in the world. Its API gravity is between 37 and 42 degrees, and has 0.42%sulphur content. The New York Mercantile Exchange (NYMEX) is the primary exchange facilitating futurestrade in this light sweet crude oil.

Crude oil from the North Sea, UK, Brent is a pricing benchmark for crude from Europe and Africa. With anAPI of 39 degree and 0.4% or less sulphur content by weight, Brent crude oil is the second most tradedvariety of crude in the world.

= It is generally taken as the arithmetic average of Dubai and Oman crude grades. An API gravity between31 and 37 degrees and 2.05% or less sulphur content by weight, makes Middle East Crude Oil a heavyand sour crude oil.

= It is a variety with a very large physical market in the Gulf region. Most of the Indian refineries use crudebenchmarked against Middle East Sour Crude Oil.

= TOCOM is a prominent futures trading platform that offers trading on this grade of crude oil.

World Primary Energy Usage 2011*

* Provisional Source: EIA

33.07%

23.67%

30.34%

4.88%

6.45% 1.59%

Oil

Natural gas

Coal

Nuclear energy

Hydro electricity

Renewables

MCX is aleading

commodity

exchange inIndia, with a

market share of87%*

(Q3 FY 2012-13)*In terms of the value of commodity

futures contracts traded(Source: Data maintained by FMC)

The Multi Commodity Exchange of India Limited (MCX) is a India-based state-of-the-art electronic

commodity futures exchange that facilitates online trading, and clearing and settlement of commodityfutures transactions, providing a platform for risk management. MCX offers trading in more than 40commodity futures contracts across segments including bullion, ferrous and non-ferrous metals, energy,and agricultural and agri-based commodities.



www.mcxindia.com

GLOBAL SCENARIO!

Global proven oil reserves in 2011 was around 1652.6 thousand million barrels, of which the OPEC had1196.3 thousand million barrels.! Crude oil accounts for 33% of the world's primary energy consumption.! Global oil demand was 88.3 million barrels per day (mmb/d) in 2011, an increase of around 0.7% from the

previous year.! In 2010, Russia, Saudi Arabia, the US and Iran were the top oil producing countries. Although the US is the

world's third largest oil producing nation, it is the world's largest consumer and importer of oil followedby China, Japan and India.

World’s leading crude oil exporting and importing countries - 2011

World’s leading crude oil producing and countries 2011consuming

Proved reserves Thousand million barrels 2011

Source: BP Statistical Data

Source: BP Statistical Data

Source: EIA

Global oil demand by region

-3.0

-2.0

-1.0

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1.0

2.0

3.0

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2008 2009 2010 2011E 2012E

OECD

World

mmb/d

Rest ofWorld

ChinaMiddle-

East

OtherNon-

OECD

Source: IEA, Deutsche Bank

(thousand b/d)

17.90%

16.10%

10.60%9.10%

8.70%

6.10%

5.90%

5.30%

2.90%

12.30%

Venezuela

Saudi ArabiaCanada

Iran

Iraq

Kuwait

United Arab Emirates

Russian Federation

Libya

Others

0

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2007 2008 2009 2010 2011

IraqKuwaitMexicoUnited Arab EmiratesCanadaChinaIranUSRussian FederationSaudi Arabia 0

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2007 2008 2009 2010 2011

CanadaGermanySouth KoreaBrazilSaudi ArabiaRussian FederationIndiaJapanChinaUS

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Globally, MCX isNo.1 in goldand silver,

No.2 innatural gas,and No.3 incrude oil*

*In terms of the commodity futurescontracts traded during CY 2011

(Source: Websites of exchangesand FIA data)

9 4 8



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INDIAN SCENARIO= Oil accounts for 29% of India's total energy consumption and there seems to be no possibility of scaling

down the dependence on these fuels.= Crude oil production during the period April-March 2012 (provisional) was 38.19 million metric tonne

(MMT), as compared with 37.71 MMT during the corresponding period last year.= The total oil consumption in 2010 was around 3.34 mmb/d. India is the fourth largest consumer of oil and

imports more than 70% of its crude oil requirement.= India's refining capacity stood at 193.39 MMTPA on January 1, 2012 of which 116.89 MMT is in the public

sector, 6.00 MMT in joint ventures, and the balance 70.50 MMTPA in the private sector.= The Government of India realised the need to explore more areas and has implemented New Exploration

Licensing Policy (NELP), according to which 100% FDI is permitted for small and medium sized oil fieldsthrough competitive bidding.

OPEC OVERVIEW

The Organisation of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, in September1960. OPEC coordinates and unifies the petroleum policies of its member countries and ensures thestabilisation of oil markets in order to secure an efficient, economic and regular supply of petroleum forconsumers, a steady income to producers, and a fair return on capital for those investing in the petroleumindustry. It is an organisation of twelve developing countries. They are Saudi Arabia, Iran, Kuwait, UAE, Iraq,Venezuela, Nigeria, Angola, Libya, Algeria, Qatar and Ecuador. OPEC accounts for about 75% of the world'sproven oil reserves. OPEC controls almost 40% of the world's crude oil. Export from OPEC represents 55% ofthe oil traded internationally.

Source: Hart Energy, Bloomberg, Coface, CIA * Excludes Iraq as it currently does not have a production quota.

* Provisional Source: BP Statistical Data

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OPEC Quota System for its member countries

India’s primary energy consumptionby fuel type - 2010*

Oil consumption per capita

( t h o u s a n

d b / d )

29.00%

9.80%

52.90%

1.30%5.30% 1.60%

Oil

Natural gas

Coal

Nuclear energyHydro electricity

Renew- ables

MCX reaches

out to over1,770 cities andtowns in India

through3,46,000+

tradingterminals

(including CTCL)(as of Q3 FY 2012-13)



www.mcxindia.com

Source: Bloomberg

= IOCL (Mathura, Panipat, Barauni, etc.)= BPCL (Mumbai)

= HPCL (Vizag, Mumbai)= CPCL (Manali and Narimanam)= MRPL (Mangalore)= BRPL (Assam)= RPL (Jamnagar)= NRL (Numaligarh)= KRL (Cochin)

= IOCL is India’s largest oil refinery company. RPL’s Jamnagarrefinery is the largest refining in India and the third largest inthe world.

= The Government of India has permitted foreign participationin oil exploration, an activity restricted earlier to state ownedentities.

= Even after officially dismantling Administered PriceMechanism (APM), the product prices continue to be policydriven rather than market driven.

= The petroleum refining and marketing sector is undergoing ahuge restructuring with influx of foreign direct investmentsthus facilitating more efficient markets in times to come.

= OPEC output, supply and spare capacities = Weather conditions= Increased demand from emerging and = Speculative buying and selling

developing countries; geopolitics = Changes in the refining sector, for example, a= US crude and products inventories data drop in the refinery utilisation rate= Currency fluctuations

INDIAN REFINERIES

PRICE MOVING FACTORS

Volume MCX Crude oil Price

020406080

100120140160

Global Benchmark Crude Oil Prices

Brent WTI Dubai Fateh Bonny Light

$ / B a r r e

l

0

1000

2000

3000

4000

5000

60007000

050000

100000150000200000250000300000350000400000450000500000

MCX Crude Oil Price & Volume

` p e r

b a r r e

l

V o

l u m e

i n L o t s

MCX is the firstcommodityexchange in

India to launchmini futurescontracts in

variouscommodities



www.mcxindia.com

MEASUREMENT (AVERAGE GRAVITY)

EXCHANGES FACILITATING CRUDE OIL FUTURES

IMPORTANT WEB SITES

1 US barrel = 42 US gallons

1 US barrel = 158.98 litres1 MT = 7.33 barrelsNote: The measurement of barrels per tonne vary from origin to origin.

ICE | MCX | NYMEX* | TOCOM

www.eia.doe.gov | www.opec.org | www.bloomberg.com | www.bp.com | www.iea.org

* CME Group

CONTRACT SPECIFICATIONS OF CRUDE OIL

SYMBOL CRUDEOILDescription CRUDEOILMMMYY

No. of contracts a year 12Contract duration 6 months

Trading period Monday through Saturday# Trading session Monday to Friday: 10:00 am to 11:30 pm

Saturday: 10:00 am to 02:00 pm Trading unit 100 barrels

Quotation/Base value ` / barrel

Maximum order size 10,000 barrels Tick size (minimum ` 1price movement)Daily price limits 4%

Price quote E x-Mumbai (excluding all taxes, levies, and otherexpenses)

Initial margin Minimum 5% or based on SPAN, whichever is higherAdditional and/or special margin In case of additional volatility, an additional margin (on

both buy side and sell side) and/or special margin (oneither buy side or sell side) at such percentage, asdeemed fit, will be imposed in respect of all outstandingpositions.

Maximum allowable For individual clients: 4,80,000 barrelsopen position For a member collectively for all clients: 24,00,000 barrels

or 15% of the total market wide open position,whichever is higher

Delivery unit 50,000 barrels with +/– 2% tolerance limitDelivery center(s) Port installation at Mumbai/JNPT Port

QUALITY SPECIFICATIONS Light Sweet Crude Oil confirming to the following

quality specifications is deliverable:= Sulphur: 0.42% by weight or less= API gravity: Between 37 degrees - 42 degrees= All volumes are defined at 60 degrees Fahrenheit.

TRADING

DELIVERY

#: Day light timing 10:00 am to 11:55 pm (Winter)

MCXCOMDEXis India’s first

real timecompositecommodityfutures price

index



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Note: Please refer to the exchange circulars for the latest contract specifications and delivery andsettlement procedures.

CONTRACT SPECIFICATIONS OF BRENT CRUDE OIL

SYMBOL BRCRUDEOIL

Description BRENTCRUDEMMMYY

No. of contracts a year 12Contract duration 3 months

Trading period Monday through Saturday# Trading session Monday to Friday: 10:00 am to 11:30 pm

Saturday: 10:00 am to 02:00 pm Trading unit 100 barrels

Quotation/Base value ` / barrel

Maximum order size 10,000 barrels Tick size (minimum ` 1price movement)

Daily price limits 4%Price quote E x-Mumbai (excluding all taxes, levies, and Freight)

Initial margin Minimum 5% or based on SPAN, whichever is higher

Special margin In case of additional volatility, an additional margin (onboth buy side and sell side) and/or special margin (oneither buy side or sell side) at such percentage, asdeemed fit, will be imposed in respect of alloutstanding positions.

Maximum allowable open position For individual clients: 4,00,000 barrelsFor a member collectively for all clients: 20,00,000barrels or 15% of the total market wide open position,whichever is higher

Delivery unit 50,000 barrels with +/– 2% tolerance limit

Delivery center(s) Port installation at Mumbai/JNPT PortQUALITY SPECIFICATIONS Brent Blend confirming to the following

quality specifications is deliverable:= API gravity: Between 38 degrees - 39 degrees= Sulphur: 0.4% by weight or less

TRADING

DELIVERY

#: Day light timing 10:00 am to 11:55 pm (Winter)

MCX hasstrategic

alliances withseveral

commodityexchanges of

the world

0 9 0 4 1 3

Multi Commodity Exchange of India LimitedExchange Square, Suren Road, Chakala, Andheri (East), Mumbai 400 093 | Tel. no.: +91-22-6731 8888 | Email: [email protected] | Website: www.mcxindia.com

Customer Support: +91-22-6649 4040 | To get the latest futures prices on mobile: visit http://m.mcxindia.com or sms “MCX <Commodity name >” to 58888

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