CRUDE OIL

Multi Commodity Exchange of India Limited (MCX) is a state-of-the-art commodity futures exchange
based in India. The exchange facilitates online trading in commodity futures contracts across
segments, including bullion, base metals, energy, and agricultural commodities, besides offering
clearing and settlement services. The exchange thus provides an effective mechanism for price
risk management.
INTRODUCTION

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Crude oil is a complex mixture of various hydrocarbons found in the upper layers of the earth's crust.
Crude oil is often known as the “mother of all commodities” because of its importance in the
manufacturing of a wide variety of materials.

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Crude oil accounts for 32.6% 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
manufacturing a wide variety of other products, including asphalt for roads; lubricants for all kinds of
machines; and plastics for toys, bottles, and food wraps, among others.
World primary energy usage, 2014*
Hydro electricity 6.8%

Renewables 2.5%

Nuclear energy 4.4%
Oil 32.6%

MCX is a leading
commodity
exchange in India,
with a market
share of 84.06%*
(2014-15)
*In terms of the value of commodity
futures contracts traded
(Source: FMC Data, May 2015)

Coal 30%

Source: BP Statistical Data
*Provisional

Natural gas 23.7%

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 or sour the crude oil is.

A) West Texas Intermediate
A high-quality crude oil explored and physically traded in the U.S., West Texas Intermediate is one of the
largest traded commodity in the world. Its API gravity is between 37OAPI and 42OAPI, 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 a
O
gravity between 38OAPI and 39 API and 0.4% or less of sulphur content by weight, Brent crude oil is the
second most traded variety of crude in the world.

C) Middle East Crude Oil

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

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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.

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

0 Ind 2.0 Sa 7. Chinese consumption growth was below average but still recorded the largest increment to global oil consumption (+390. Total world proven oil reserves reached 1700. Global oil production growth was more than double that of global consumption. = Consumption. 2014 = Reserves.3%. 2.8% Iran 4.2 6.6% Iraq 3. with Japanese oil consumption falling to its lowest level since 1971 Oil proved reserves % share in 2014* Venezuela 17.3% Source: BP Statistical Data | * provisional World oil production % share in 2014* Saudi Arabia 12. Saudi Arabia (+110.5 years of global production.1% US 12.1 million barrels per day (bpd) or 2.000 bpd).8% Kuwait 6.8 ut h 1.0 5. which added 1.8% Russian Federation 6.5 2. OECD consumption declined by 1.0 .9 billion barrels.000 bpd) and Iran (+90.6% South Korea 2.org rm Ge ain Sp an y n Ko re a pa ay n Ira rw No ria Ku wa it Ve ne zu ela An go la q Ira ge Ni UA E a bia ssi Ru 1. OPEC countries continue to hold a major share of world’s reserves.000 bpd) and Brazil (+230.1% Saudi Arabia 15.GLOBAL SCENARIO.000 bpd) were offset by gains in Iraq (+140.1 1.000 bpd).000 bpd) also reached record levels in 2014.0 0.mcxindia.7% MCX is India’s 1st listed exchange World oil consumption % share in 2014* China 12. its lowest since 2003. and taking over from Saudi Arabia as the world’s largest oil producer. Global oil consumption grew by 0.8 4.1 million bpd.6% of the global total.6% Canada 2. The largest addition to reserves came from Saudi Arabia.7% India 4.0 5.000 bpd).0 ina 2.4% Others 46. Along with the US.2 3. Declines in Libya (-490.0 Ja 2.1 1.5% Others 17.8% Iran 9.0 1.0 1.6 million bpd) recorded the largest growth in the world.5 Ch 3.0 ud 6.0 So 1.1 Source: opec. The US (+1.com Top 10 Importers of crude oil.8% Libya. Production outside OPEC grew by 2.9% Others 27.0 iA 2. 2014 (million bpd) 8.0% Canada 5.0 6.2 7.0% Source: BP Statistical Data | * provisional Top 10 Exporters of crude oil. where reserves fell by 1.0 7.3% Germany 2.5 4.1 2.1 billion barrels. = Production.8% – a little below its recent historical average and significantly weaker than the increase of 1.0% Japan 4.000 bpd).8 million bpd or 0.2% Kuwait 3.3% China 5.1 billion barrels at the end of 2014.0 Ita ly Fra nc Ne e th er lan ds 4. accounting for 71.0 3.5 US 2.0 www.0 ra 1.000 bpd) and Angola (-90.0% United Arab Emirates 4.0 8.6 ia 2. OPEC output was flat. becoming the first country ever to increase production by at least 1 million bpd for three consecutive years. rising by 2.7% United Arab Emirates 5.3% Mexico 3. the eighth decrease in the past nine years.3% Venezuela 3. 2014 (million bpd) 9.4 7.7% Nigeria 2.2%.0 0.4 million bpd seen in 2013. Countries outside the OECD once again accounted for all of the net growth in global consumption.2% Iraq 8.0% Canada 10. and the group’s share in global production fell to 41%.4% US 19. Japan recorded the largest decline (-220.2 1.0 3.4% Italy 1. sufficient to meet 52.2 1.9% Russian Federation 12.0% France 1. The largest decline came from Russia.8% Mexico 2. production in Canada (+310.

13 Sept. 2014 as compared to the position a year ago.24 MMT during same period. They are: Saudi Arabia. As of 2014. Kuwait.2 Venezuela 7.com * Provisional Source: BP Statistical Data * Provisional Source: MOSPI . Saudi Arabia remains the top OPEC producer. 12 MCX reaches out to over 1.79 MMT during 2013-14.1 200 150 100 50 0 Oil 28. 2014* Indian crude oil consumption 250 Hydro electric 4. providing nearly one-third of the OPEC supply.6% of the world's proven oil reserves.1 Saudi Arabia 32. Nevertheless.5 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14* Crude oil consumption (MMT) www.5 31 30. Production of crude petroleum increased from 32.7 33 32. and the net import increased from 99. Kuwait (9.1 Nigeria 6. producers and analysts. Angola. saw the biggest decline.19 MMT during 2005-06 to 37.000+ trading terminals % Share in OPEC monthly production* Sept. UAE.214 million bpd respectively.91%) followed by Assam (22.000 bpd to 10. and a fair return on capital for those investing in the petroleum industry. Nigeria.0 Libya 1. Iran.80. a steady income to producers.2 Nuclear Energy 1.3 Coal 56. and regular supply of petroleum for consumers.8 million bpd and 85.6 Renewables 2.5 30 29. = As on April 2014. and Ecuador.5 32 31. there is no change in refining capacity in the country (215 MMTPA) over the period of one year.8 Iran 8. Qatar. OPEC accounts for about 71.8%).2 Source: Bloomberg Iraq 13. Venezuela. The other members that follow are Iraq (13. It is an organization of twelve developing countries.900 cities and towns in India through 4.000 bpd to 2. OPEC's top producer.0 *As of Sept 2015 INDIAN SCENARIO = The estimated reserves of crude oil in India as on March 2014 stood at 762.69%). Saudi Arabia.7 Sept. There was increase of 0.2%). Iran's and Iraq's production fell by 100.3 Natural Gas 7.281 in Aug.5 29 28. Libya. OPEC total monthly estimated crude oil production (million bpd) Ecuador 1. in September 1960.5 Algeria 3.OPEC OVERVIEW = The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad. 15 Kuwait 9. OPEC accounted for approximately 41% of the global oil production. OPEC coordinates and unifies the petroleum policies of its member countries and ensures the stabilization of oil markets to secure an efficient.1 UAE 9. 2015 according to Bloomberg survey of oil companies. 14 Sept. reducing output by 200.mcxindia. India’s primary energy consumption by fuel type.4 Angola 5. Iraq.7%).5 (including CTCL) (FY 2014-15) Qatar 2. Geographical distribution of Crude oil indicates that the maximum reserves are in the Western Offshore (42.1%).74 million metric tonnes (MMT). economic. and Venezuela (7. the UAE (9%). Iran (8.41 MMT to 189.57% in the estimated reserve of crude oil for the country as a whole by March. Iraq.000 bpd to 4.048 million bpd from 32. Algeria.3 million bpd. Output from OPEC in September 2015 declined to 32.

= The petroleum refining and marketing sector is undergoing a huge restructuring with influx of foreign direct investments. Mumbai) = CPCL (Manali and Narimanam) = MRPL (Mangalore) = BRPL (Assam) = RPL (Jamnagar) = NRL (Numaligarh) = KRL (Cochin) = IOCL is India’s largest oil refining company. = RPL’s Jamnagar refinery is the largest refinery in India and the third largest in the world. an activity restricted earlier to state-owned entities. Panipat. 2009 Oct. 2011 Dated Brent WTI Cushing Oct. supply. and spare capacities = Weather conditions = Increased demand from emerging and developing countries.com . 2007 Oct. PRICE MOVING FACTORS = OPEC output. Barauni. 2013 Oct.98 litres 1 MT = 7. = The Government of India has permitted foreign participation in oil exploration. 2011 Volume(LHS) Oct. 2015 MCX Crude oil Price(RHS) Source: Bloomberg Global benchmark crude oil prices 160 140 USD / Barrel 120 100 80 60 40 20 0 Oct.) = BPCL (Mumbai) = HPCL (Vizag. 2009 Oct. a drop in the refinery utilisation rate = Currency fluctuations MEASUREMENT (AVERAGE GRAVITY) 1 US barrel = 42 US gallons 1 US barrel = 158. 2007 Oct.mcxindia. etc. geopolitics = Speculative buying and selling = US crude and product inventories data = Changes in the refining sector. 2015 Dubai Fateh Source: Bloomberg MCX is the first commodity exchange in India to launch mini futures contracts in various commodities INDIAN REFINERIES = IOCL (Mathura. thus facilitating more efficient markets in the times to come. for example.33 barrels Note: The measurement of barrels per metric tonne (MT) varies from origin to origin. 2013 Oct.500000 8000 400000 7000 6000 300000 5000 4000 200000 3000 ` / barrel Volume in lots MCX crude oil price & volumes 2000 100000 1000 0 0 Oct. www.

EXCHANGES FACILITATING CRUDE OIL FUTURES ICE | MCX | NYMEX* | TOCOM * CME Group IMPORTANT WEB SITES www. Trading unit 100 barrels Quotation/Base value ` / barrel 10 barrels Maximum order size 10. # US daylight saving timings. whichever is higher DELIVERY Delivery unit 50. of contracts a year 12 Contract duration 6 months TRADING MCXCOMDEX.000 barrels Tick size (minimum price movement) `1 Daily price limits The base price limit will be 4%. the daily price limit will be relaxed upto 9%.000 barrels or 20% of the market wide open position. and other expenses) Initial margin Minimum 5% or based on SPAN.com | www. the relaxation will be allowed upto 6% without any cooling off period in the trade.00. www. will be imposed in respect of all outstanding positions.42 degrees = All volumes are defined at 60 degrees Fahrenheit.com Note: Please refer to the exchange circulars for the latest contract specifications and delivery and settlement procedures.m.mcxindia.opec.org | www. whichever is higher Additional and/or special margin In case of additional volatility.m. then after a cooling off period of 15 minutes. / 11:55# p.bp. as deemed fit.m. Maximum allowable open position For individual clients: 4. to 11:30 p.gov | www.iea. In case price movement in international markets is more than the maximum daily price limit (currently 9%).000 barrels or 5% of the market wide open position.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: = Sulphur: 0.bloomberg. an additional margin (on both buy side and sell side) and / or special margin (on either buy side or sell side) at such percentage. the same may be further relaxed in steps of 3%. whichever is higher For a member collectively for all clients: 48.42% by weight or less = API gravity: Between 37 degrees . Whenever the base daily price limit is breached. levies.eia. In case the daily price limit of 6% is also breached. . India’s first real time composite commodity futures price index.80. is a market trends indicator Trading period Mondays through Fridays Trading session Monday to Friday: 10:00 a.com | www. Price quote Ex-Mumbai (excluding all taxes. and inform the Commission immediately.org SNAPSHOT OF CONTRACT SPECIFICATIONS OF CRUDE OIL AND CRUDE OIL MINI SYMBOL CRUDEOIL CRUDEOILM CRUDEOILMMMMYY Description CRUDEOILMMMYY No.doe.

Note: Please refer to the exchange circulars for the latest contract specifications and delivery and settlement procedures. no. the relaxation will be allowed upto 6% without any cooling off period in the trade.mcxindia. 15 Customer Support: +91-22-6649 4040 | To get the latest futures prices on mobile. and Freight) Initial margin Minimum 5% or based on SPAN. and inform the Commission immediately. Andheri (East). Mumbai 400 093 | Tel. an additional margin (on both buy side and sell side) and / or special margin (on either buy side or sell side) at such percentage.mcxindia.000 barrels Tick size (minimum price movement) `1 Daily price limits The base price limit will be 4%.: +91-22-6731 8888 | Email id: info@mcxindia. Chakala.com | Website: www.4% by weight or less # US daylight saving timings. the same may be further relaxed in steps of 3%.000 barrels or 5% of the market wide open position. the daily price limit will be relaxed upto 9%.000 barrels or 20% of the market wide open position. whichever is higher Special margin In case of additional volatility. visit http://m. as deemed fit. All Rights Reserved. .com Multi Commodity Exchange of India Limited Exchange Square. Suren Road.mcxindia. levies. Price quote Ex-Mumbai (excluding all taxes. whichever is higher For a member collectively for all clients: 40. then after a cooling off period of 15 minutes. In case the daily price limit of 6% is also breached.39 degrees Sulphur: 0. whichever is higher DELIVERY Delivery unit 50. will be imposed in respect of all outstanding positions.000 barrels with +/– 2% tolerance limit Delivery center(s) Port installation at Mumbai / JNPT Port QUALITY SPECIFICATIONS Brent Blend confirming to specifications is deliverable: = = www.com CIN: L51909MH2002PLC135594 © MCX 2015.com the following quality API gravity: Between 38 degrees . of contracts a year 12 Contract duration 3 months TRADING MCX has strategic alliances with several commodity exchanges of the world Trading period Mondays through Fridays Trading session Monday to Friday: 10:00 am to 11:30 pm / 11:55# pm Trading unit 100 barrels Quotation/Base value ` / barrel Maximum order size 10.SNAPSHOT OF CONTRACT SPECIFICATIONS OF BRENT CRUDE OIL SYMBOL BRCRUDEOIL Description BRENTCRUDEMMMYY No.00. In case price movement in international markets is more than the maximum daily price limit (currently 9%). Whenever the base daily price limit is breached.00. Maximum allowable open position For individual clients: 4.