USOIL - Crude Oil


Introduction & Production

In today’s World no one can deny the importance of crude oil in global economies. According to the CIA World Fact book in 2011 the world consumes about 90 million barrels of oil each day. The top three oil producing countries are Saudi Arabia, Russia, and the United States. About 80% of the world’s readily accessible reserves are located in the Middle East, with 62.5% coming from the Arab 5: Saudi Arabia, UAE, Iraq, Qatar and Kuwait. The International Energy Agency’s (IEA) 2010 World Energy Outlook estimated that conventional crude oil production has peaked and is depleting at 6.8% per year. By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.

Geopolitical Impacts

Much of the world’s crude oil is located in regions that have been prone historically to political upheaval, or have had their oil production disrupted due to political events. Several major oil price shocks have occurred at the same time as supply disruptions triggered by political events, Notably the Arab Oil Embargo in 1973-74, the Iranian revolution and Iran-Iraq war in the late 1970s and early 1980s, and Iraq’s invasion of Kuwait in 1990. More recently, disruptions to supply (or curbs on potential development of resources) from political events have been seen in Nigeria, Venezuela, Iraq, Iran, and Libya.

Trading Opportunities in Crude Oil

The complex nature of short-term factors affecting the world economy together with the ever-depleting numbers of known oil resources on earth is expected to keep the oil prices extremely volatile in the coming years. It is up to us as participants to correctly judge these market fluctuations and create feasible trading opportunities for our clients.