Energy:: Price , Volume Traded & Factors Affecting It

Presented By:
Satabadi Mohapatra Shiva Kumar Shushrita Mallik Srijani Ganguli Surbhi Katoch Vunod Singh

HEATING OIL
Introduction
  

Very similar to diesel fuel, and both are classified as distillates. Less commonly used as an industrial fuel or for power generation. Accounts for about 25% of the yield of a barrel of crude oil, the second largest "cut" after gasoline (petrol).

Heating oil futures are traded on

Intercontinental Exchange (ICE) NYMEX.

INDIAN SCENARIO
 

India only produces diesel known as High Speed Diesel (HSD). Consumption in 2008-09 is estimated to be 15.9 billion gallons in 2008-09, which is up by 30% from 2004-05 consumption of 12.2 billion gallons.

The production of High Speed Diesel has increased from 5.3 billion gallons in 1990-91 to 19.4 billion gallons in 2008-09, marking a 265% increase.

High Speed Diesel exports from India have grown substantially, with it jumping from 2.6 billion gallons in 2005-06 to 4.2 billion gallons in 2008-09, an increase of above 60%.

 

The major refiners include IOCL,BPCL, HPCL and Reliance Industries Ltd . The RIL being a private player exports most of its production of petroleum products

WORLD SCENARIO
 

Estimated to use about 10 billion gallons of heating oil each year. The US is the world's largest consumer of heating oil, with total consumption in 2008 reported to be around 4.6 billion gallons.

US is the largest refiner of crude oil holding 20% of the total world refining capacity of 87,700 kilo barrels per calendar day, China (8.9%), Former Soviet Union (8.8%), Japan (5.3%) and India (4.1%).

The production of heating oil or diesel in any country depends on the type of economy it follows. For e.g., while US has adopted a gasoline based economy. India is largely a diesel based economy, leading to more production and consumption of gasoline in US and High-Speed Diesel (HSD) in India.

Exchanges - New York Mercantile Exchange and Intercontinental Exchange

FACTORS INFLUENCING PRICES



Globally, heating oil prices are highly correlated with crude oil prices as, ( Cost of heating oil = cost of( crude oil + refining, distribution and storage.) The factors include, supply-demand, global economic scenario, natural disasters, currency fluctuations, geo-political tensions, interest rates, prices of other assets, etc. Prices are normally observed to rise during the winter months, ( November March. The supply-demand scenario in US, is very important as US is the largest consumer, accounting for around 40% of global consumption. Diesel demand depends on economic growth, particularly in developing nations, as well as a push in Europe to increase the usage of diesel vehicles. Storage also plays an important role in trade patterns and prices. Availability of supplies drives the price. Disruptions in production due to extreme weather or other events can also lead to prices picking up.

  

CRUDE OIL
Introduction:


Crude oil is a mixture of chemical compounds, extracted from the earths crust. Crudes qualities vary widely, as does price, depending on the type and source.

Crude oils are often evaluated (by traders, analysts etc.) on the basis of their
API gravity and Sulphur content.

 

The Light Sweet Crude Oil also known as West Texas Intermediate . The benchmark used for pricing oil imports into the US, the worlds largest oil consumer. WTI is a blend of crude oil produced in the fields of Texas, New Mexico, Oklahoma and Kansas.

Traded internationally on New York Mercantile Exchange (NYMEX) as well as on Intercontinental Exchange (ICE).

PRESENT SCENARIO


India had approximately 5.6 billion barrels of proven oil reserves as of Jan, 2010, the second-largest in the Asia-Pacific region after China. (Oil & Gas Journal (OGJ) India produced roughly 880 thousand barrels per day (bbl/d) of total oil in 2009 from over 3,600 operating oil wells.

Approximately 680 thousand bbl/d was crude oil, the remainder was other liquids and refinery gain.

In 2009, India consumed nearly 3 million bbl/d, making it the fourth largest consumer of oil in the world.

India is expected to become the fourth largest net importer of oil in the world by 2025, behind the United States, China, and Japan.

FACTORS AFFECTING CRUDE OIL PRICES

Current supply in terms of output, especially the production quota set by OPEC. Oil reserves, including what is available in U.S. refineries and what is stored at the Strategic Petroleum Reserves. Oil demand, particularly from the U.S. (as estimated by the Energy Information Agency) . Value of U.S. dollar. Geopolitical Situation, particularly in the Middle East and Africa . Economic data / indicators of USA, China and other big consuming nations . Natural factors like Hurricanes . Transportation / Logistical issues like Destruction of Pipelines, Shipping issues etc.

NATURAL GAS
Introduction:


While natural gas is formed primarily of methane, it can also include ethane, propane, butane and pentane.

The distinctive rotten egg smell, actually an odorant called Mercaptan is added to natural gas helping in detecting any leaks.

 

It is used for heating, cooking, as a fuel for air conditioners, boilers, etc. It has also been used as an automotive fuel in the form of Compressed Natural Gas (CNG).

Natural gas is expressed by British thermal units (Btu)

INDIAN SCENARIO
 

Main production sites- Western offshore area. The on-shore fields in Assam, Andhra Pradesh and Gujarat States are other major producers of gas.

India consumption of natural gas stands 51.27 billion cu m in 2010 which makes her 15th in the world in terms of Consumption.

 

There has been 23% increase in the consumption from the 2009 year. Natural Gas imports to India are done through three transitional gas pipelines viz. Iran-Pakistan-India Pipeline Project, Myanmar-Bangladesh-India Gas Pipeline Turkmenistan-Afghanistan-Pakistan pipeline.

The Ministry of Petroleum & Natural Gas regulates the allocation and pricing of gas produced by ONGC and OIL .

Natural Gas is currently the source of half of the LPG produced in the country.

WORLD SCENARIO
Natural Gas Producer
8% 5% North America Middle East Asia Pacific 4% South & Central America 9% Other Europe & Eurasia Africa

34%

40%

Top five producers - US, Russia, Canada, Iran and Norway which accounts for 50.7 % of total production.

US, being the top producer contribute 20% alone. However, Russia is the biggest consumer of Natural gas in the world followed by US.

FACTORS AFFECTING NATURAL GAS PRICE

Mainly driven by: The demand for natural gas is mainly driven by the following factors: Weather Demographics Economic growth Fuel competition Storage Exports The supply for natural gas is mainly driven by the following factors: Pipeline capacity Storage Gas drilling rates Natural phenomena Technical issues Imports

OTHER FACTORS

price of crude oil and/or petroleum products, especially in continental Europe. Strong Economic Growth Can Drive Up Natural Gas Demand and Prices Oil Prices Can Influence Natural Gas Prices Some large-volume gas consumers (primarily industrial consumers and electricity generators) can switch between natural gas and oil, depending on the prices of each. Winter Weather Strongly Influences Residential and Commercial Demand Severe Weather When hurricanes hit, the production of natural gas along the coast is hindered, which causes the price of natural gas to rise. Lack of Demand During an economic downturn, consumers use less natural gas, resulting in a surplus of natural gas. This surplus drives the price of natural gas down.

VOLUMES TRADED IN MCX

(CRUDE OIL)

Quantity(In 000's)
700000

600000

609339.6

500000

400000 Quantity(In 000's) 300000

200000

100000

0 Jan/04 May/05 Oct/06 Feb/08 Jul/09 Nov/10 Apr/12 Aug/13

VOLUMES TRADED IN MCX (HEATING OIL)

Quantity(In 000's)
250000

217673.4 200000

150000

Quantity(In 000's) 100000

50000

0 2008 2009 2010 2011 2012