Crude oil is the most widely used energy material in the world. Crude oil is a mixture of hydrocarbons that exists in a liquid phase in natural underground reservoirs. Oil and gas account for about 60 per cent of the total world's primary energy consumption.
Crude oil - as petroleum directly out of the ground is called - is a remarkably varied substance, both in its use and composition. Crude oil is formed from the preserved remains of prehistoric zooplankton and algae, which have been settled to the sea (or lake) bottom in large quantities under anoxic conditions. It was formed over millions of years from the remains of tiny aquatic plants and animals that lived in ancient seas due to compression and heating of ancient organic materials over geological time. The oldest oil-bearing rocks date back to more than 600 million years, the youngest being as old as about 1 million years.
Although various types of hydrocarbons - molecules made of hydrogen and carbon atoms - form the basis of all crude oils, they differ in their configurations. The chemical structure of petroleum is composed of hydrocarbon chains of different lengths. Because of this, petroleum may be taken to oil refineries and the hydrocarbon chemicals separated by distillation and treated by other chemical processes, to be used for a variety of purposes. It can be a straw-colored liquid or tar-black solid. Red, green and brown hues are not uncommon.
Burning crude oil itself is of limited use. To extract the maximum value from crude, it first needs to be refined into petroleum products. The best-known of these is gasoline, or petrol. However, there are many other products that can be obtained when a barrel of crude oil is refined. These include liquefied petroleum gas (LPG), naphtha, kerosene, gasoil and fuel oil. Other useful products which are not fuels can also be manufactured by refining crude oil, such as lubricants and asphalt (used in paving roads). A range of sub-items like perfumes and insecticides are also ultimately derived from crude oil.
Furthermore, several of the products listed above which are derived from crude oil, such as naphtha, gasoil, LPG and ethane, can themselves be used as inputs or feedstocks in the production of petrochemicals. There are more than 4,000 different petrochemical products, but those which are considered as basic products include ethylene, propylene, butadiene, benzene, ammonia and methanol. The main groups of petrochemical end-products are plastics, synthetic fibres, synthetic rubbers, detergents and chemical fertilisers.
Considering the vast number of products that are derived from it, crude oil is a very versatile substance. Life as we know it today would be extremely difficult without crude oil and its by-products.
The edifice modern industrial economy as well as agriculture depends upon crude oil in way or the other. Crude oil is also a key variable in global financial markets as the largest traded commodity in the world. Broadly crude oil is categorized into three groups – Brent Crude, West Texas Intermediate and OPEC Crude.
Brent crude is the standard benchmark of crude oil in Europe. Refined mainly in Northwest Europe North Sea coast is the main source of Brent Crude. Priced slightly above the reference price of Organization of Petroleum Exporting Countries Brent crude however is on average lower by U.S. $1-2 per barrel lower compared with West Texas Intermediate.
West Texan Intermediate known as WTI in trade parlance is considered as of very high quality due to very lower sulphur content. WTI normally commands a premium of $ 2-4 dollar per barrel compared with OPEC basket price and 1-2 with Brent Crude.
OPEC, the organization formed in mid 1960s by some of the major oil producing countries, is a powerful cartel in shaping global oil prices. Besides countries in West Asian region other key members in the cartel are Venezuela, Algeria and Nigeria.
Crude oil accounts for nearly 40% of the global energy demand. Global consumption of crude oil is estimated at 80 million barrels per day. The U.S. with 20 million is the leading consumer followed by China, Japan and European Union. Members of OPEC provide around 55% of global crude oil exports.
India, rated as one of the 10 top oil consumers in the world, depends on import for nearly 70% of its crude oil requirements. India’s consumption estimated at 2.5 million barrels per day is expected to rise further due to rapid pace of economic development. Domestic production of crude with less than 1 million barrels per day India depends heavily on imports. Indian imports are mainly from OPEC members.
Crude oil prices are highly sensitive to global political and economic developments. Oil prices surged ahead during the past three years from less than $30 per barrel to over $140 per barrel. Currently hovering around over $ 50 per barrel crude oil prices would play a crucial role in shaping the fortunes global economic developments as well as financial markets for a long time to come.
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Commodity : Crude Oil
Commodity : Gold
Gold, the first metal used by humans, remains one of the most valued metals since prehistoric times. Egyptian hieroglyphs dating 2600 BCE describe gold as something king Tushratta of the Mitanni claimed was as "common as dust" in Egypt. Egypt and Nubia had the resources to make them major gold-producing areas for much of history. Gold is also mentioned several times in the Old Testament.
The south-east corner of the Black Sea was famed for its gold. Exploitation is said to date from the time of Midas, and this gold was important in the establishment of what is probably the world's earliest coinage in Lydia between 643 and 630 BCE.
The European exploration of the Americas was fueled in no small part by reports of the gold ornaments displayed in great profusion by Native American peoples, especially in Central America, Peru, and Colombia.
Gold has long been considered one of the most precious metals, and its value has been used as the standard for many currencies (known as the gold standard) in history. Gold has been used as a symbol for purity, value, royalty, and particularly roles that combine these properties (see gold album). Gold as a sign of wealth and prestige was made fun of by Thomas More in his treatise ‘Utopia’.
On that imaginary island, gold is so abundant that it is used to make chains for slaves, tableware and lavatory-seats. When ambassadors from other countries arrive, dressed in ostentatious gold jewels and badges, the Utopians mistake them for menial servants, paying homage instead to the most modestly-dressed of their party.
There is an age-old tradition of biting gold in order to test its authenticity. Although this is certainly not a professional way of examining gold, the bite test should score the gold because gold is considered a soft metal according to the Mohs' scale of mineral hardness. The purer the gold the easier it should be to mark it. Painted lead can cheat this test because lead is softer than gold.
Gold in antiquity was relatively easy to obtain geologically; however, 75% of all gold ever produced has been extracted since 1910.[2] It has been estimated that all the gold in the world that has ever been refined would form a single cube 20 m (66 ft) a side (8000 m³).
During the 19th century, gold rushes occurred whenever large gold deposits were discovered, including the California, Colorado, Otago, Australian, Witwatersrand, Black Hills, and Klondike gold rushes. Because of its historically high value, much of the gold mined throughout history is still in circulation in one form or another.
Like other precious metals, gold is measured by troy weight and by grams. When it is alloyed with other metals the term carat or karat is used to indicate the amount of gold present, with 24 carats being pure gold and lower ratings proportionally less.
The purity of a gold bar can also be expressed as a decimal figure ranging from 0 to 1, known as the millesimal fineness, such as 0.995.
The price of gold is determined on the open market, but a procedure known as the Gold Fixing in London, originating in 1919, provides a twice-daily benchmark figure to the industry.
Historically gold was used to back currency; in an economic system known as the gold standard, a certain weight of gold was given the name of a unit of currency. For a long period, the United States government set the value of the US dollar so that one troy ounce was equal to $20.67 ($664.56/kg), but in 1934 the dollar was revalued to $35.00 per troy ounce ($1125.27/kg). By 1961 it was becoming hard to maintain this price, and a pool of US and European banks agreed to manipulate the market to prevent further currency devaluation against increased gold demand.
On 17 March 1968, economic circumstances caused the collapse of the gold pool, and a two-tiered pricing scheme was established whereby gold was still used to settle international accounts at the old $35.00 per troy ounce ($1.13/g) but the price of gold on the private market was allowed to fluctuate; this two-tiered pricing system was abandoned in 1975 when the price of gold was left to find its free-market level. Central banks still hold historical gold reserves as a store of value although the level has generally been declining. The largest gold depository in the world is that of the U.S. Federal Reserve Bank in New York.
Since 1968 the price of gold on the open market has ranged widely, with a record high of $850/oz ($27,300/kg) on 21 January 1980, to a low of $252.90/oz ($8,131/kg) on 21 June 1999 (London Fixing).[5] On 11 May 2006 the London gold fixing was $715.50/oz.[6]
According to World Gold Council, at US$21.2bn, global dollar demand for gold reached new heights in the second quarter of 2008, rising 9% on year earlier levels. Global investment demand for gold showed the strongest surge, reaching $3.5 billion in Q2 2008, 29% higher than Q2 2007, with particular strength in the US, China, Egypt and Vietnam.
However, with a decrease of 19% on Q2’07 to 735.6 tonnes, the continued high and volatile price of gold dampened total demand in tonnage terms during the quarter, according to Gold Demand Trends, which was released on August 13 by the World Gold Council (WGC). This particularly impinged on jewellery demand, which fell 24% to 504 tonnes and was also affected by tightened consumer spending due to the global credit squeeze and growing inflationary pressures. Markets which saw the largest decline in jewellery demand were India, which fell 47% to 118 tonnes, and the US, which fell 30% to 33 tonnes. However, positive news came from China and Egypt, which saw a 2% and 8% increase in jewellery demand respectively.
Despite a number of markets turning to gold due to its investment attributes as a safe haven in times of rising inflation and unstable equity markets, identifiable global investment demand in tonnage terms was down by 4% over Q2 2007 to 119.8, as some investors took profits. This decline represents a 9% decrease in net retail investment, which was partly offset by a move to positive net investment in Exchange Traded Funds (ETFs) and similar products.
Commodity : Aluminum
Aluminium is the third most abundant element in the Earth's crust. In nature however it only exists in very stable combinations with other materials (particularly as silicates and oxides) and it was not until 1808 that its existence was first established.
Pure aluminium is a silvery-white metal with many desirable characteristics. It is light, nontoxic (as the metal), nonmagnetic and nonsparking. Its density is only one third that of steel. Aluminum is resistant to weather, common atmospheric gases and a wide range of liquids. Aluminum has a high reflectivity, and therefore finds more decorative uses. Aluminum has high elasticity, which is an advantage in structures under shock loads.
Aluminium keeps its toughness down to very low temperatures, without becoming brittle like carbon steels. It is easily worked and formed. Aluminium conducts electricity and heat nearly as well as copper.
Aluminium is today one of the most widely used industrial raw materials all over the world. Known for its lightweight and corrosion resistance, Aluminium is an important material used in a wide spectrum of industries ranging from aerospace, engineering, transportation, logistics and construction.
Aluminium ore, most commonly bauxite, is plentiful and occurs mainly in tropical and sub-tropical areas - Africa, West Indies, South America and Australia. There are also some deposits in Europe. It is easily formed, machined, and cast. Pure aluminium is soft and lacks strength, but alloys with small amounts of copper, magnesium, silicon, manganese, and other elements have very useful properties. The Bayer process is used to refine aluminium from bauxite.
The leading producing countries include the United States, Russia, Canada, the European Union, China, Australia, Brazil, Norway, South Africa, Venezuela, the Gulf States (Bahrain and United Arab Emirates), India and New Zealand; together they represent more than 90 percent of the world primary aluminium production. Global production of Aluminium was estimated to be 33 million ton in 2006.
The largest aluminium markets are North America, Europe and East Asia. India is rated as the fifth largest producer of Aluminium in the world. It is estimated at about 3037 million tonnes for all categories of bauxite (proved, probable and possible). With the present level of consumption of aluminum, the identified reserves would have an estimated life of over 350 years. India's reserves are estimated to be 7.5 per cent of the total deposits and installed capacity is about 3 per cent of the world.
In terms of demand and supply, the situation is not only self-sufficient, but it also has export potential on a competitive basis.
About a decade back, the primary Indian aluminium producers were BALCO, NALCO, INDAL, HINDALCO and MALCO. Of the five, two (BALCO and NALCO) were in the public sector while the other three were in the private sector.
As a result of the process of liberalization of trade in aluminium, India has emerged as a net exporter of aluminium, on competitive terms. Government monopoly, in terms of aluminium production, removal of price and distribution control over aluminium, has been diluted in favour of private sector.
The ownership pattern in private sector has undergone changes. With the takeover of INDAL by the HINDALCO, it has emerged as the major producer of aluminium in the country.
Production capacity was expected to increase with the completion of 35,000 ton per year smelting capacity at Hindalco and 245,000 ton expansion by Balco by the end of 2006. Annual consumption of India is projected to reach 780,000 tons in 2007 compared with 618,000 ton. India also exports around 82,000 ton of Aluminium per year.
LME, NYMEX, TOCOM, SHFE are the leading centres of global aluminium trade.