CRUDE OIL

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

World Primary Energy Usage 2011*

6.45%

MCX is a
leading
commodity
exchange in
India, with a
market share of
87%*
(Q3 FY 2012-13)
*In terms of the value of commodity
futures contracts traded
(Source: Data maintained by FMC)

1.59%

4.88%

Oil
33.07%

Natural gas
Coal
Nuclear energy

30.34%

Hydro electricity

* Provisional
Source: EIA

23.67%

Renewables

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

A) West Texas Intermediate

A highquality crude oil explored and physically traded in the US, West Texas Intermediate is one of the
largest 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 futures
trade in this light sweet crude oil.

B) Brent Crude Oil

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

C) Middle East Crude Oil

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

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

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

GLOBAL SCENARIO
!

Global proven oil reserves in 2011 was around 1652.6 thousand million barrels, of which the OPEC had
1196.3 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 followed
by China, Japan and India.

Global oil demand by region

Proved reserves Thousand million barrels 2011

mmb/d
Venezuela

4.0

Saudi Arabia

12.30%

17.90%

2.90%
5.30%
5.90%

Iran

2.0

Iraq

1.0

China

United Arab Emirates

9.10%

10.60%

-1.0

Libya

-2.0
2008

2009

2010

2011E

2012E

-3.0

Source: BP Statistical Data

*In terms of the commodity futures

contracts traded during CY 2011
(Source: Websites of exchanges

Rest of
World

OECD

0.0

Russian Federation

Others

Globally, MCX is
No.1 in gold
and silver,
No.2 in
natural gas,
and No.3 in
crude oil*

Other
Middle- NonEast
OECD

Kuwait

16.10%
6.10%
8.70%

World

3.0

Canada

Source: IEA, Deutsche Bank

Worlds leading crude oil producing and consuming countries 2011

(thousand b/d)

60000

60000

Canada

Iraq
50000

50000

Kuwait
Mexico

40000

Germany
South Korea

40000

Brazil

United Arab Emirates

Canada

30000

Saudi Arabia

30000

Russian Federation

China
20000

20000

Iran
US

10000

India
Japan

10000

China

Russian Federation
2007

2008

2009

2010

US

Saudi Arabia

2007

2011

2008

2009

2010

2011

Source: BP Statistical Data

and FIA data)

10,000

8,000

9,000
8,000
7,000
6,000

5,000

www.mcxindia.com

Source: EIA

948

1,346

1,292

1,000

1,697

2,000

2,170

3,000

2,235

1,490
1,752

1,817

2,206

2,242

1,752

2,343

1,000

2,601

2,000

2,489

4,000

3,000

4,329

5,000

4,000

4,635

6,000

7,504

7,000

8,167

9,000

8,822

Worlds leading crude oil exporting and importing countries - 2011

OPEC OVERVIEW
The Organisation of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, in September
1960. OPEC coordinates and unifies the petroleum policies of its member countries and ensures the
stabilisation of oil markets in order to secure an efficient, economic and regular supply of petroleum for
consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum
industry. 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's
proven oil reserves. OPEC controls almost 40% of the world's crude oil. Export from OPEC represents 55% of
the oil traded internationally.

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

434
Ecuador

1,203
Algeria

731

1,469
Libya

Qatar

1,517

1,673
Nigeria

Angola

1,986

2,223
UAE

Iraq*

2,222
Kuwait

Iran

3,336

8,051

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

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 fields
through competitive bidding.

Indias primary energy consumption

by fuel type - 2010*
5.30% 1.60%
1.30%
29.00%

Oil
Natural gas
Coal
Nuclear energy
Hydro electricity

9.80%
52.90%

www.mcxindia.com

Venezuela

MCX reaches
out to over
1,770 cities and
towns in India
through
3,46,000+
trading
terminals

9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

Saudi Arabia

(thousand b/d)

OPEC Quota System for its member countries

* Provisional
Source: BP Statistical Data

Renew- ables

Oil consumption per capita

MCX Crude Oil Price & Volume

7000
6000
5000
4000
3000
2000

` per barrel

Volume in Lots

500000
450000
400000
350000
300000
250000
200000
150000
100000
50000
0

1000
0

Volume

Source: Bloomberg

MCX Crude oil Price

$ / Barrel

Global Benchmark Crude Oil Prices

MCX is the first

commodity
exchange in
India to launch
mini futures
contracts in
various
commodities

160
140
120
100
80
60
40
20
0

Brent

WTI

Dubai Fateh

Bonny Light

INDIAN REFINERIES

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IOCL (Mathura, Panipat, Barauni, etc.)

IOCL is Indias largest oil refinery company. RPLs Jamnagar

refinery is the largest refining in India and the third largest in
the world.

The Government of India has permitted foreign participation

in oil exploration, an activity restricted earlier to state owned
entities.

Even after officially dismantling Administered Price

Mechanism (APM), the product prices continue to be policy
driven rather than market driven.

The petroleum refining and marketing sector is undergoing a

huge restructuring with influx of foreign direct investments
thus facilitating more efficient markets in times to come.

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

PRICE MOVING FACTORS

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www.mcxindia.com

OPEC output, supply and spare capacities

Increased demand from emerging and
developing countries; geopolitics
US crude and products inventories data
Currency fluctuations

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Weather conditions
Speculative buying and selling
Changes in the refining sector, for example, a
drop in the refinery utilisation rate

MEASUREMENT (AVERAGE GRAVITY)

1 US barrel = 42 US gallons
1 US barrel = 158.98 litres
1 MT = 7.33 barrels
Note: The measurement of barrels per tonne vary from origin to origin.

EXCHANGES FACILITATING CRUDE OIL FUTURES

ICE | MCX | NYMEX* | TOCOM
* CME Group

IMPORTANT WEB SITES

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

CONTRACT SPECIFICATIONS OF CRUDE OIL

SYMBOL

CRUDEOIL

Description

CRUDEOILMMMYY

No. of contracts a year

12

Contract duration

6 months

TRADING

MCXCOMDEX
is Indias first
real time
composite
commodity
futures price
index

Trading period

Monday through Saturday

Trading session

Monday to Friday:
Saturday:

Trading unit

100 barrels

10:00 am to 11:30 pm#

10:00 am to 02:00 pm

Quotation/Base value

` / barrel

Maximum order size

10,000 barrels

Tick size (minimum

price movement)

`1

Daily price limits

4%

Price quote

Ex-Mumbai (excluding all taxes, levies, and other

Initial margin

Minimum 5% or based on SPAN, whichever is higher

Additional and/or special margin

In case of additional volatility, an additional margin (on

both buy side and sell side) and/or special margin (on
either buy side or sell side) at such percentage, as
deemed fit, will be imposed in respect of all outstanding
positions.

Maximum allowable
open position

For individual clients: 4,80,000 barrels

For a member collectively for all clients: 24,00,000 barrels
or 15% of the total market wide open position,
whichever is higher

expenses)

DELIVERY
Delivery unit

50,000 barrels with +/ 2% tolerance limit

Delivery center(s)

Port installation at Mumbai/JNPT Port

QUALITY SPECIFICATIONS

Light Sweet Crude Oil confirming to the following

quality specifications is deliverable:

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www.mcxindia.com

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

Sulphur: 0.42% by weight or less

API gravity: Between 37 degrees - 42 degrees
All volumes are defined at 60 degrees Fahrenheit.

CONTRACT SPECIFICATIONS OF BRENT CRUDE OIL

SYMBOL

BRCRUDEOIL

Description

BRENTCRUDEMMMYY

No. of contracts a year

12

Contract duration

3 months

TRADING

MCX has
strategic
alliances with
several
commodity
exchanges of
the world

Trading period

Monday through Saturday

Trading session

Monday to Friday:
Saturday:

Trading unit

100 barrels

Quotation/Base value

` / barrel

Maximum order size

10,000 barrels

Tick size (minimum

price movement)

`1

10:00 am to 11:30 pm#

10:00 am to 02:00 pm

Daily price limits

4%

Price quote

Ex-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 (on

both buy side and sell side) and/or special margin (on
either buy side or sell side) at such percentage, as
deemed fit, will be imposed in respect of all
outstanding positions.

Maximum allowable open position

For individual clients: 4,00,000 barrels

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

DELIVERY
Delivery unit

50,000 barrels with +/ 2% tolerance limit

Delivery center(s)

Port installation at Mumbai/JNPT Port

QUALITY SPECIFICATIONS

Brent Blend confirming to the following

quality specifications is deliverable:

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API gravity: Between 38 degrees - 39 degrees

Sulphur: 0.4% by weight or less

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

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

www.mcxindia.com

090413

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

Multi Commodity Exchange of India Limited

Exchange Square, Suren Road, Chakala, Andheri (East), Mumbai 400 093 | Tel. no.: +91-22-6731 8888 | Email: info@mcxindia.com | Website: www.mcxindia.com