Lower oil prices should benefit the global economy but will cause a shift in the external balances of some countries. A fall in prices is equivalent to a tax cut for oil importers, which is likely to increase spending in other goods.
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Brent crude oil is a light sweet crude oil from North Sea. It has API (American Petroleum Institute) gravity between 38-39 and has higher sulphur content than the other well-known benchmark, WTI crude oil.
Brent crude oil is a global benchmark for other grades and is widely used to determine crude oil prices in Europe and in other parts of the world.
Brent is typically refined in Northwest Europe, but a major portion is been exported to the US Gulf and East Coasts, and also to parts of Mediterranean.
It is more expensive than the Organization of Petroleum Exporting Countries (OPEC) basket, but lesser than West Texas Intermediate (WTI) because of higher sulphur content than the WTI crude. The current Members of OPEC are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
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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 sulphur (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 is ideal for production of gasoline and middle distillates. It was originally traded on the open-outcry International Petroleum Exchange in London, but since 2005 has been traded on the electronic Intercontinental Exchange, known as ICE. One contract equals 1,000 barrels (160 m3). Contracts are quoted in U.S. dollars, therefore each tick lost or gained equals $10.
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 ranks among the top 10 largest oil-consuming countries.
Oil accounts for about 30 per cent of India's total energy consumption. The country's total oil consumption is about 2.2 million barrels per day. India imports about 70 per cent of its total oil consumption and it makes no exports.
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India faces a large supply deficit, as domestic oil production is unlikely to keep pace with demand. India's rough production was only 0.8 million barrels per day.
The oil reserves of the country (about 5.4 billion barrels) are located primarily in Mumbai High, Upper Assam, Cambay, Krishna-Godavari and Cauvery basins.
Balance recoverable reserve was about 733 million tons (in 2003) of which offshore was 394 million tones and on shore was 339 million tons. India had a total of 2.1 million barrels per day in refining capacity. Government has permitted foreign participation in oil exploration, an activity restricted earlier to state owned entities.