Presentation on oil trend

1. Crude oil trends in last three
years
and
its impact on Indian capital
markets

2. 15.04
12.00
10.80
4.45
3.99
3.98
3.66
3.11
2.92
2.52
0.00 5.00 10.00 15.00 20.00
United States
Saudi Arabia (OPEC)
Russia
Iraq (OPEC)
Iran (OPEC)
China
Canada
United Arab Emirates (OPEC)
Kuwait (OPEC)
Brazil
Crude oil Production(Millions Barrel/day

3. Crude Oil Consumption(Millions Barrel/d
19.96
13.57
4.34
3.92
3.69
3.33
3.03
2.63
2.45
2.42
0.00 5.00 10.00 15.00 20.00 25.00
United States
China
India
Japan
Russia
Saudi Arabia
Brazil
South Korea
Germany
Canada

4. India’s Import Destination
India is 80 per cent dependent on imports to meet its oil needs
25.0
22.1
13.1
9.6
9.5
9.2
5.9
5.6
Iraq Saudi Arabia
Persian gulf nation UAE
Venezuela Nigeria
Kuwait Mexico

5. Crude oil Price

6. Major international petroleum exchanges
• The price of crude oil is set by movements on the three major international
petroleum exchanges:-
• i. The New York Mercantile Exchange
• ii. The International Petroleum Exchange in London
• iii. The Singapore International Monetary Exchange

7. What Causes Oil Prices to Fluctuate?
• OPEC Influences Prices:- OPEC controls 40% of the world's supply of
oil. The organization sets production levels to meet global demand and can
influence the price of oil and gas by increasing or decreasing production.
• Supply and Demand Impact:- When supply exceeds demand, prices fall
and the inverse is also true when demand outpaces supply. The 2014 fall in
oil prices can be attributed to a lower demand for oil in Europe and China.
• Natural Disasters- Natural disasters are another factor that can cause oil
prices to fluctuate.

8. What Causes Oil Prices to Fluctuate?
• Production Costs, Storage:- Production and storage costs can cause oil
prices to rise or fall as well. Extraction cost in Canada will be more than
extraction cost in any middle east country.
• Further the various short term reasons are:
 Increasing taxation
 Government Regulations

9. About Organization of Petroleum Exporting
Countries(OPEC)
• It is a permanent intergovernmental organization, currently consisting of 14 oil
producing and exporting countries, spread across three continents America, Asia and
Africa, founded on 14th September 1960 in Baghdad, Iraq, by five Founder
Members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela

10. Why OPEC?
• To ensure stabilization of prices in international oil markets, with a
view to eliminating harmful and unnecessary fluctuations.
• To provide an efficient economic and regular supply of petroleum to
consuming nations and a fair return on capital to those investing in the
petroleum industry

11. The Impact of Crude Oil Prices on Indian
Stock Markets
• Current Account Deficit (CAD) and Rupee depreciation:
Every U$10/bbl increase in oil price leads to a 0.55% or 55 bps increase in the
current account deficit. India is one of the largest importers of oil in the world.
It imports more than three-fourths of its oil needs. Lower CAD will mean
reduced stress on foreign currency outflows.
• A rise in the transportation cost: A rise or fall in crude oil prices affects
the transportation cost of goods. Crude oil prices have a considerable impact
on the prices of consumer durables.

12. The Impact of Crude Oil Prices on Indian
Stock Markets
• A rise in the cost of production: Companies like tyre, lubricants, logistics,
footwear, refinery, and airlines hugely depend on crude oil prices. Further,
products like paints too will benefit from reduced crude oil prices. Thus, a
fall crude oil prices have a positive impact on the stocks of these companies.
• Inflation: Every US $10/bbl increase in oil price will result in a 0.3% or 30
bps increase in CPI. Crude oil has an impact on the prices of all goods and
services. Agricultural commodities or manufactured goods, oil prices affect
their MRP. A considerable fall in prices of goods and services will ease
inflation.