crude oil report1

8/13/2019 Crude Oil Report1

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R.LAKSHMI ANVITHA

(1226213102)

GREEN TECHNOLOGIES-

SUPPLY AND DEMAND ANALYSIS

SUMMARY:

Oil, also known as petroleum, is the most actively traded commodity in the world. The price is

usually quoted per barrel. Oil trading is transacted on changes in the price of crude oil and does not

involve a physical purchase of the commodity. The direction of the price movement determines

whether a trader will profit or not. The two kinds of contracts that are traded are oil futures and

options. The price of oil can be significantly affected by political factors, as well as environmental

factors such as natural disasters. Other influencing factors include demand such as that driven by

modernizing populations in India and China, as well as supply - that is, production rates in oil

producing countries. In addition, technological advances in alternative energies may also affect the

price of oil. In short, oil trading can involve significant price fluctuations making it an exciting and

potentially profitable market. Oil prices also affect currency trading. Sometimes, a weakened US

dollar may cause a rise in the price of oil. Other currencies that rely on commodity prices, such as

CAD can also be affected by changes in oil prices. In this report we are analyzing the demand andsupply , price factors of crude oil.

INTRODUCTION:

Until as recently as the early 1970s, the main channel for oil supply was the integrated system of

the major oil companies. Each company had its own source of crude oil supply as well as the

capacity to refine it. Petroleum products outside this closed system, either released from it due to

imbalances between refinery output and market demand, or refined independently of it, constituted

the basis for spot trading.

The volume of spot trading was limited to around5 % of the total oil trade, while the remaining

95% was based on contracts specifying prices and quantities over relatively long periods of time.

Even that limited amount of spot trading was conducted in a very simple manner. Most of the trade

was in the form of un invoiced exchanges and based on personal trust, characterizing An era that


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many oil company executives remember as the "good old days. Today, spot and spot-related

Trades comprises ome8 0% to 85% of the internationally traded petroleum. Petroleum trading not

only has developed into one of the largest worldwide commodity markets but has turned into an

increasingly Complex business.

GLOBAL OIL MARKET DISRUPTIONS:

While Brent crude oil spot prices have increased as much as $7 per barrel (6%) since the chemical

weapons incident in Syria on August 21, 2013, market fundamentals had been moving Brent prices

higher even earlier. From mid-April to August 20, Brent crude oil spot prices increased almost $15

per barrel (15%) because of increasing global refinery demand coupled with record levels of

unexpected crude oil production outages, notably in Iraq and Libya. Global unplanned crude oil

and liquid fuels disruptions averaged 2.7 million barrels per day (bbl/d) in August, the highest

level over the period January 2011 through August 2013.

Oil supply disruptions in key producing countries are up sharply:

Libya.Protests at many seaport facilities have blocked exports, and, as a result, crude oil supply

disruptions averaged close to 1 million bbl/d in August, up from 0.13 million bbl/d in April.

Pipeline closures by militia groups at the end of August have worsened the situation, with

disruptions rising to 1.35-1.4 million bbl/d by the end of August.

Nigeria.Disruptions in June on key pipelines helped curtail almost 450,000 bbl/d of production,

up 100,000 bbl/d compared to May. Production recovered somewhat by August when 290,000

bbl/d were off-line.

Iraq.Persistent attacks on the pipeline from Kirkuk to Ceyhan in Turkey helped push disruptions

of Iraqi crude oil production to 250,000 bbl/d in August, up 100,000 bbl/d from April.

DEMAND

Global oil product demand is projected to increase from 89.0 mb/d in 2011 to 95.7 mb/d in 2017

(a compound average growth rate of 1.2% or 1.1 mb/d per year). This outlook is based on an

average annual expansion in global economic activity of 3.9% and assumes that oil intensity

declines by around 2.5% per year. Asia and the Middle East account for the bulk of the projected


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growth in demand (0.6 mb/d or 2.1% per year and 0.3 mb/d or 3.4% per year, respectively),

followed by the former Soviet Union (0.1 mb/d or 2.9%) and Africa (0.1 mb/d or 3.0%). Overall,

our assessments and projections of global demand have been trimmed by 0.6 mb/d on average for

2011-2016 since our December 2011 update, due mostly to reduced baseline data and a weaker

macroeconomic backdrop.

Oil demand in the emerging and newly industrialised economies of the non-OECD breaks through

50 mb/d by 2017, rising by an average of 1.3 mb/d (or 2.9%) per annum over the six year period.

In contrast, OECD demand declines by an average of 0.2 mb/d (or -0.4%) per annum, to 45.4 mb/d

in 2017. The predicted OECD fall reflects a combination of continued efficiency gains, changes in

consumer behaviour, market saturation and fuel switching. Total non-OECD demand is forecast to

overtake its OECD counterpart in 2014. As non-OECD countries become wealthier, potential

demand growth becomes more restrained, as the structural developments that are causing absolute

contractions in OECD demand increasingly impact the non-OECD. Diesel/gasoil will be the

primary driver of global oil use, accounting for 40% of total demand growth and 30% of absolute

demand. Gasoil has increasingly dominated demand growth in recent years, given its multiple uses

and drivers. Consumption globally is projected to rise to 28.8 mb/d by 2017, an average annual

gain of 0.5 mb/d (or 1.7%) over the six-year forecast from 26.1 mb/d in 2011. Gasoil growth is

concentrated in non-OECD Asia (roughly 56% of total global growth), particularly China. Demand

in China is forecast to rise by 3.6% per annum, through the outlook, to 3.9 mb/d by 2017. The

health of the global economy poses a central risk to this outlook, given sluggish OECD economic

expansion, persistent debt issues in the OECD and signs of a slowdown in China.


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SUPPLY:

The supply forecast has become more robust. Global production capacity is expected to increase

by an aggregate 9.3 mb/d over the period to 102 mb/d in 2017, or 1.5 mb/d per year. Around

20% of liquids growth comes from Iraqi capacity and 40% comes from North American oil

sands or light tight oil production. Natural gas liquids (NGL) supply grows by 2.4 mb/d from to

14.5 mb/d in 2017, of which non-OPEC NGLs (centred in the US) contribute around 60%.

OPEC crude oil production capacity is forecast to rise by a steep 3.34 mb/d over the 2011-2017period, to 37.54 mb/d, with Iraq providing just over 50% of the increase. By contrast, sanctions

hit Iran sees production capacity decline by more than 30% by 2017 compared to 2011 levels.

This relatively higher capacity headline figure is skewed, however, by the temporary drop in

OPEC capacity to a four-year low during the 2011 Libyan civil war. Recovering Libyan

production provides a near 40% increase in our forecast and if removed from the calculations

shows OPEC will raise capacity by a smaller 2.08 mb/d, in line with growth rates of previous

years.

Non-OPEC supply is expected to increase by 4.8 mb/d from 2011 to 2017, or at an annual

average of 790 kb/d (9%). Remarkably, roughly 80% of the growth comes from North American

light tight oil and Canadian oil sands production, offsetting mature field decline elsewhere. This

growth reflects the formidable power of the technological advances applied to developing

unconventional resources a technological revolution akin to the onset of 3-D seismic


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exploration and development in the 1980s. So far these technologies have been focused on the

North American oil patch, reflecting not only the regions large non-conventional resources but

also its favourable investment conditions. While there is a strong potential for the same

transformative technologies to lift unconventional production elsewhere, that is not expected to

bear fruit until after the forecast period.

For the next five years, there will thus be a striking regional imbalance in the allocation of non-

OPEC supply growth, with the Americas accounting for the vast majority of the increment. In

addition to the US and Canada, the Brazilian subsalt and Colombia are expected to contribute.

OPEC member Venezuela may also see marginal growth in unconventional output, though the

country is not expected to overcome its above-ground challenges in the forecast period, even in

the event of a shift in political power. High oil prices drove capital spending up by around 8% in

2012, but they have also led to increased demand for labour and oilfield service equipment.

Finding and development costs (and cost inflation) are slightly lower now than in 2011

(especially in the US). Lower crude prices would translate into lower drilling activity and

production rates in the medium term, and therefore represent a downside risk to the forecast.

While the broad uptake of horizontal technologies to tap tight oil deposits outside of the US

could increase oil supplies, geopolitical unrest could also threaten oil production and transport,

especially in the Middle East and Africa


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CONCLUSION:

In the above analysis , it is clear that there is a rapid increase for demand of crude oil across world.

In India it is increasing at a rate of 4.56% per annum. It is to be noted that India is after china in the

race. For the next five years, there will thus be a striking regional imbalance in the allocation of

non-OPEC supply growth, with the Americas accounting for the vast majority of the increment.

The health of the global economy poses a central risk to this outlook, given sluggish OECD

economic expansion, persistent debt issues in the OECD and signs of a slowdown in China.


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The Green Party's work in 2013 has delivered positive and significant results on the issues that matter to New Zealand.

Government backing of City Rail LinkThe Government made a huge backtrack on theiropposition to the city rail link in Auckland.After five years of campaigning by the Green Party,the Government have seen the lightand agreed to build the rail link. It is a smart green transport solution and we were at the forefront of it.

Oil and gas waste free milkAfter the Green Party highlighted on Campbell Live the issue oftoxic waste from oil and gas explorationbeing spread on farmsin Taranaki, Fonterramade a promise not to collect milkfrom any new dairy farms that have this waste spread on them.

Improvements to the Food BillFollowing a huge outcry from foodies around New Zealand, we lobbied Governmentand achieved positive changesto the Food Bill that will nowprotect your right togrow and swap food andkeep down compliance costsfor small businesses.

Opening up of Government banking contractAfter years of Green Party pressure, the huge government banking contract will finally beopened up to get better value for moneyfor the New Zealandpublicinstead of sending all the profitsto Australian-owned Westpac bank.

Cleaning up toxic sitesIn May, Green Party mining spokesperson Catherine Delahunty and Environment Minister Amy Adams attended the closing ceremony at Tui Mine tomark the successful conclusion of the mine clean-up project.The Tui Mine clean-up was part of the toxic site management work conducted under the

Memorandum of Understanding between the Green Party and the National Party. Another success of our work with Government has been the on-going development of a national register of contaminated sites.

Warmer drier homesOur Memorandum of Understanding with National has also meant that over 150,000 New Zealand homes have had insulation installed as part oftheWarm Up New Zealand scheme. Researchers found $1.21 billion worth of health benefits from the scheme.

Truth in banana labellingWe were part of the successful call topeel the "ethical choice" labelsoff Dole bananas after Oxfam released a report detailing just how unethical they

were.

Minimising animal testingWe brought to light the issue of animal testing as part of the Psychoactive Substances Bill and have succeeded inforcing the Government to include

provisionsin the Bill, which while not going as far as we want, will at least restrict animal testing.

Helping New Zealanders to keep our assetsThe Green Party was an active part of theKeep Our Assetscoalition which collected over 440,000 signatures and delivered them to the Clerk ofParliament in July.

Winning marriage equalityWe worked with the many groups to achieveMarriage Equality in New Zealand.As the only party to have marriage equality as policy, we were able to

vote all together for it and support MPs from other parties to vote for it as well.

Strengthening International Criminal CourtKennedy Graham succeeded in passing a motion about New Zealand ratification of the Kampala Amendmentsto the Rome Statute which willstrengthen the International Criminal Court. This was the Government's first public acknowledgement that they will be seeking to ratify theamendments.

Growing New Zealand's cycle trailThere have been thousands of more kilometres of dedicated cycle paths, off-road cycling tracks and on-roadcycling routes opened or approvedunder

the Memorandum of Understanding we have with the Government.

Pressure to achieve better health and safety regulationsThechanges in the lawto provide for a new stand-alone Occupational Health and Safety agency and much tougher regulation of mining have occurredbecause of the pressure we put on the Government over the Pike River disaster.

Improving ACCWe have beenkeeping the pressure on the Governmentto fix ACC. Significant improvements are being made to its culture and the way it treats

people. For example, it is now much more likely that specialist medical assessments will be genuinely independent, and claimants are being given achoice over who conducts them.
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REFERENCES:

1)IEA (2013) Oil medium term market report, 14th may 2013

http://www.iea.org/newsroomandevents/speeches/SlidePresentationMTOMRLaunch.pdf

2) FOREXYARD Crude oil trading, 2013

http://www.forexyard.com/en/trading/crudeoil

3) EIA(2013) The Availability and Price of Petroleum and PetroleumProducts Produced in Countries Other Than Iran ,29th August 2013

http://www.eia.gov/analysis/requests/ndaa/?src=Analysis-f2

4)OPEC Monthly Oil Market Report October 2013

http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_Octob

er_2013.pdf

5)EIA (2013), "Global crude oil supply disruptions and strong demand support high oil prices",Today in Energy, US Energy Information Administration, September 10

http://www.eia.gov/todayinenergy/detail.cfm?id=12891
http://www.iea.org/newsroomandevents/speeches/SlidePresentationMTOMRLaunch.pdfhttp://www.iea.org/newsroomandevents/speeches/SlidePresentationMTOMRLaunch.pdfhttp://www.forexyard.com/en/trading/crudeoilhttp://www.forexyard.com/en/trading/crudeoilhttp://www.eia.gov/analysis/requests/ndaa/?src=Analysis-f2http://www.eia.gov/analysis/requests/ndaa/?src=Analysis-f2http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_October_2013.pdfhttp://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_October_2013.pdfhttp://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_October_2013.pdfhttp://www.eia.gov/todayinenergy/detail.cfm?id=12891http://www.eia.gov/todayinenergy/detail.cfm?id=12891http://www.eia.gov/todayinenergy/detail.cfm?id=12891http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_October_2013.pdfhttp://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_October_2013.pdfhttp://www.eia.gov/analysis/requests/ndaa/?src=Analysis-f2http://www.forexyard.com/en/trading/crudeoilhttp://www.iea.org/newsroomandevents/speeches/SlidePresentationMTOMRLaunch.pdf

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