A mineral oil consisting of a mixture of hydrocarbons of natural origin, yellow to black in color, of variable specific gravity and viscosity; often referred to simply as crude.

A fossil fuel formed from plant and animal remains many million of years ago. It comprises organic compounds built up from hydrogen and carbon atoms and is, accordingly, often referred to as hydrocarbons. Crude oil is occasionally found in springs or pools but is usually drilled from wells beneath the earth's surface.

VARIETIES OF CRUDE OIL

The petroleum industry often characterizes crude oils according to their geographical source, e.g., Alaska North Slope Crude. Oils from different geographical areas have unique properties; they can vary in consistency from a light volatile fluid to a semi-solid.

Class A: Light, Volatile Oils - These oils are highly fluid, often clear, spread rapidly on solid or water surfaces, have a strong odor, a high evaporation rate, and are usually flammable. They penetrate porous surfaces such as dirt and sand, and may be persistent in such a matrix. They do not tend to adhere to surfaces; flushing with water generally removes them. Class A oils may be highly toxic to humans, fish, and other biota. Most refined products and many of the highest quality light crudes can be included in this class. Class B: Non-Sticky Oils - These oils have a waxy or oily feel. Class B oils are less toxic and adhere more firmly to surfaces than Class A oils, although they can be removed from surfaces by vigorous flushing. As temperatures rise, their tendency to penetrate porous substrates increases and they can be persistent. Evaporation of volatiles may lead to a Class C or D residue. Medium to heavy paraffin-based oils fall into this class. Class C: Heavy, Sticky Oils - Class C oils are characteristically viscous, sticky or tarry, and brown or black. Flushing with water will not readily remove this material from surfaces, but the oil does not readily penetrate porous surfaces. The density of Class C oils may be near that of water and they often sink. Weathering or evaporation of volatiles may produce solid or tarry Class D oil. Toxicity is low, but wildlife can be smothered or drowned when contaminated. This class includes residual fuel oils and medium to heavy crudes. Class D: Nonfluid Oils - Class D oils are relatively non-toxic, do not penetrate porous substrates, and are usually black or dark brown in color. When heated, Class D oils may melt and coat surfaces making cleanup very difficult. Residual oils, heavy crude oils, some high paraffin oils, and some weathered oils fall into this class.

Categories of Crude Oil

West Texas Intermediate (WTI) crude oil is of very high quality. Its API gravity is 39.6 degrees (making it a "light" crude oil), and it contains only about 0.24 percent of sulfur (making a "sweet" crude oil). WTI is generally priced at about a $2-4 per-barrel premium to OPEC Basket price and about $1-2 per barrel premium to Brent, although on a daily basis the pricing relationships between these can very greatly. Brent Crude Oil stands as a benchmark for Europe. India is very much reliant on oil from the Middle East (High Sulphur). The OPEC has identified China & India as their main buyers of oil in Asia for several years to come.

India in World Crude Oil Industry

Petroleum and Natural Gas: The recent exploration and production activities in the country have led to a dramatic increase in the output of oil. The country currently produces 35 million tonnes of crude oil, two-thirds of which is from offshore areas, and imports another 27 million tonnes. Refinery production in terms of crude throughput of the existing refineries is about 54 million tonnes.

Natural gas production has also increased substantially in recent years, with the country producing over 22,000 million cubic metres. Natural gas is rapidly becoming an important source of energy and feedstock for major industries. By the end of the Eighth Five-Year Plan, production was likely to reach 30 billion cubic metres.

Factors Influencing Crude Oil Markets

Shortage of oil supplies Taxation - When oil taxes are raised, end consumers often mistakenly blame the oil producers, but it is really their own governments that are responsible. Balance of demand and supply in the short term Rate of investment in the longer term Accidents Bad weather Increasing demand Halting transport of oil from producers Labour disputes

Note : If traders in the oil market believe there will be a shortage of oil supplies, they may raise prices before a shortage occurs.

Causes of low Oil Prices

  - Imbalance between supply and demand.
  - If oil production rises faster than demand.
  - If the oil industry is unprofitable and discourages investors.

Causes of high oil prices

Shortage of oil supplies Balance of demand and supply in the short term Rate of investment in the longer term If traders in the oil market believe there will be a shortage of oil supplies, they may raise prices before a shortage occurs War Natural disasters

World crude oil reserves are estimated at more than one trillion barrels, of which the 11 OPEC Member Countries hold more than 75 per cent. OPEC's Members currently produce around 27 million to 28 million barrels per day of oil, or some 40 per cent of the world total output, which stands at about 75 million barrels per day.

Is the world running out of oil?

Oil is a limited resource, so it may eventually run out, although not for many years to come. OPEC's oil reserves are sufficient to last another 80 years at the current rate of production, while non-OPEC oil producers' reserves might last less than 20 years. The worldwide demand for oil is rising and OPEC is expected to be an increasingly important source of that oil.

If we manage our resources well, use the oil efficiently and develop new fields, then our oil reserves should last for many more generations to come.

Uses of Crude Oil

Gasoline Petrol Gasoil Fuel oil Lubricants Benzene

Naphtha Asphalt (used in paving roads) Liquefied petroleum gas (LPG) Synthetic fibres Synthetic rubbers Chemical fertilisers.

Ethane Propylene Butadiene Methanol Kerosene Ethylene

Plastics Ammonia Detergents

Exchanges dealing in Crude Futures apart from MCX

The New York Mercantile Exchange (NYMEX) The International Petroleum Exchange of London (IPE) The Tokyo Commodity Exchange (TOCOM)

Crude Oil Units (average gravity)

1 US barrel = 42 US gallons 1 US barrel = 158.98 litres 1 tonne = 7.33 barrels 1 short ton = 6.65 barrels Note: barrels per tonne vary from origin to origin