Oil Trade

Oil is a hugely popular commodity among traders. With supply and demand constantly in flux,
volatility is never far away – and liquidity is rarely hard to find.

World Crude Oil Production :

Major Oil Producers (Million 2016 2017

Metric Tonnes)

United States 549 580

Saudi Arabia 581 560
Russia 547 547
Canada 223 240
Iran 202 216
Iraq 193 195
China 202 194
UAE 184 176
Kuwait 160 152
Brazil 134 140
Venezuela 135 119
Mexico 120 109
Total (Top 12) 2835 3228
Total World Crude Oil Production 4377.1 4387.1

World Crude Oil Imports:

Global purchases of imported crude oil totaled US$1.182 trillion in 2018 reflecting robust demand
from 129 countries.

Major Oil Importers (Million 2016 2017

Metric Tonnes)

China 378.1 414.6

USA 361.3 313.8
India 213.9 223.2
Japan 162.1 157.8
South Korea 145.9 151.3
Germany 91.1 90.7
Italy 65.4 68.6
Spain 63.7 65.4
Netherlands 60.6 61.6
France 55.3 57
Thailand 45.2 48.4
Taiwan 41.8 44.6
India’s Oil Imports

MT 2018 2017
Iraq 3.92 4.05 -3.21%
Saudi
Arabia 3.02 1.98 52.53%
Iran 0.86 2.32 -62.93%
Venezuela 0.96 0.85 12.94%
UAE 1.87 1.32 41.67%
Nigeria 1.35 1.12 20.54%
Mexico 0.69 1.1 -37.27%
USA 0.34 0
Kuwait 0.74 1.86 -60.22%
Angola 0.39 1.05 -62.86%

Observation :

1. India’s crude oil imports from Iran dropped 63 per cent to 0.86 Million Tonne.
Cause : India’s crude oil imports from Iran have been declining since November after US’
secondary sanctions targeting Iran’s energy sector came in effect.
India and Iran had on 2 November signed a bilateral agreement to settle oil trades through
Indian government-owned UCO Bank in the Indian currency, which is not freely traded on
international markets.

2. Making good the restrictions on Iranian crude oil exports, India’s oil imports from Saudi
Arabia, the largest producer of Organization of Petroleum Exporting Countries (OPEC),
jumped 53 per cent 3.02 MT in December 2018.

3. Venezuela is one of the top five crude oil suppliers to India. However, the volume of crude
sourced from the OPEC member has been erratic on the back of ongoing political and
economic crisis as well as under-investment in the upstream sector which is impacting the
country’s production.
Cumulatively, India’s crude oil imports from Venezuela in the April-December 2018 period
decreased 6.28 per cent to 13.42 MT from 14.32 MT imported in the corresponding period a
year ago.

Treaties governing trade of Oil :

I couldn’t find any literature on the treaties regarding the oil trade between counties.

It is the volatility of geo-politics which affects the oil prices. US sanctions on Iran has resulted in
refraining to import oil from Iran.

IP Project : We can use this as premise for our project to evaluate the options India has in this
circumstance. As Iran crude cannot make it to global market, there are following questions to be
answered :
 1. India and 7 other nations are on verge of end of US waiver What will be their course of
action?
2. US has asked OPEC to increase oil production to keep prices stable? Will OPEC gree or
disagree?
3. What are new mode of transaction for oil?

What are oil futures?

Oil futures are contracts in which you agree to exchange a set amount of oil at a set price on a set
date. They are traded on futures exchanges, and are the most commonly used method of buying and
selling oil.

While oil importers and exporters use futures to insure against the adverse effects of oil price
volatility, traders can use them to speculate on oil without buying or selling the commodity itself.
That’s because the prices of oil futures will move as the value of oil goes up or down.

So instead of buying oil, storing it, waiting for its price to increase and then selling it on and
arranging for it to be delivered, you can buy a futures contract and then sell the contract before it
expires. In doing so, you’re taking advantage of the same increase in price without the same
logistical effort.

Oil options

An oil option is similar to a futures contract, but with one key difference. With an oil option, you
have a right to buy a set amount of oil before a set date at a set price – but no obligation to trade if
you don’t want to. Options also provide a method of trading on the price movements of oil without
having to take any delivery of the commodity itself.

Where are oil futures traded?

Oil futures are traded on exchanges, just like shares. But unlike shares, they are traded in the form of
oil benchmarks. Oil doesn’t come out of the ground in the same form all around the world, and oil
benchmarks enable traders to quickly identify the quality and drilling location of the oil they are
buying and selling.

The two most popular oil benchmarks are Brent Crude and West Texas Intermediate (WTI), traded
on the Intercontinental Exchange (ICE) and New York Mercantile Exchange (NYMEX). You can trade
both of these benchmarks with IG, alongside various other oil and gas benchmarks: including
Heating Oil, Natural Gas and No Lead Gasoline.