1. Description
Crude oil is a yellowish black mineral oil that is extracted from
under the surface of the earth. This oil is consists of a number of
hydrocarbon compounds as it is formed from the million of years
old animal and plant remnants. This mixture of hydrocarbons
remains in the liquid form under the normal atmospheric
temperature and when distilled, a number of by-products can also
be extracted. Crude oil is also an important ingredient of some
medicines due to the curing properties it has.
Crude oil can be of different types depending upon its origin and
its relative weight. Brent crude oil is one of the most important
types of crude oil and it is also considered as a benchmark in the
context of the price fixation of the other types. Brent crude oil is a
lighter type crude oil possessing API (American Petroleum
Institute) gravity of 38 to 39 units and having medium levels of
sulfur.
Overview
Oil is the single most important commodity that holds the position
of a key factor in each and every economy of the world. The
world’s richest nations are at their current positions just because
of the oil factor. The importance of oil has reached such a level at
which there is no country in the world, which doesn’t need oil and
its by-products, and if somehow it doesn’t have much reserves of
oil to meet their domestic demand, these nations are ready to
import the product at any cost. Many nations have a huge share
of their earnings constituted by oil exports only. Every industry
requires oil to function properly either directly or indirectly as both
crude oil and its by-products serve as their inputs. The extent of

2. the commodity’s importance was shown to the world when the
world’s most strong economies were shaken up as the oil prices
shot up in 1973 and 1979 when the gulf countries refused to
supply oil to the countries that were the supporters of Israel in its
war with Egypt and Syria. Crude oil alone bears 60% share to
meet the global energy needs in the current scenario. The reason
for this high share in the primary energy consumption in the world
is due to the advantages that oil has over the other constituents of
primary energy such as diverse application, comparatively lesser
harm to the environment, easy handling, lower capital costs and
above all higher efficiency.
Crude oil reserves on earth are estimated to be more than 1
trillion barrels that are mostly found in the Middle East, Eastern
Europe, Africa and Central America, Middle East being the top
reserve holder. It is a clear fact that oil is a limited resource and
would finish off in a maximum of 80 years if the current rate of
consumption continues. Of these 1 trillion barrels, the world
produces around 75 million barrels per day. The largest crude oil
producing country is Saudi Arabia followed by Russia and United
States of America. The refining capacity of oil in the world as in
2002 was 4166 million tons. The consumption of crude oil in the
world has been rising with the change in time and the
technological improvements that are accompanying it. Oil is
consumed all over the globe, consumption figures standing at 76
million barrels per day and United States of America consumes
the maximum level of oil in the world. The major consumer
countries of crude oil along with their consumption figures
pertaining to the year 2006 are
United States of America (20.7 million barrels/day)

3. China (6.5 million barrels/day)
Japan (5.4 million barrels/day)
Germany (2.6 million barrels/day)
Russia (2.6 million barrels/day)
India (2.3 million barrels/day)
Canada (2.3 million barrels/day)
Brazil (2.2 million barrels/day)
South Korea (2.1 million barrels/day)
France (2.0 million barrels/day)
Mexico (2.0 million barrels/day)
Regarding the world trade situation, one important aspect is the
presence of an organization namely OPEC that controls and
regulates the exports and imports of most of the countries of the
world. OPEC stands for ‘Organization of Petroleum Exporting
Countries’ and the members include all the 11 major crude oil
producing countries and nations that are highly dependent on the
revenues from oil and oil products. As a matter of fact, OPEC
nations have 75% of the world’s total crude oil reserves of 1
trillion barrels and control around 40% of the world oil production.
OPEC member countries also dominate the world exports of
crude oil contributing to 55% of the total world exports. The major
crude oil exporting countries with their exporting figures are
Saudi Arabia* (8.73 million barrels per day)

4. Russia (6.67 million barrels per day)
Norway (2.91 million barrels per day)
Iran* (2.55 million barrels per day)
Venezuela* (2.36 million barrels per day)
United Arab Emirates* (2.33 million barrels per day)
Kuwait* (2.20 million barrels per day)
Nigeria* (2.19 million barrels per day)
Mexico (1.80 million barrels per day)
Algeria* (1.68 million barrels per day)
Iraq* (1.48 million barrels per day)
Libya* (1.34 million barrels per day)
Kazakhstan (1.06 million barrels per day)
Qatar* (1.02 million barrels per day)
In the above list, the countries with the * sign are the member
countries of OPEC. The imports of crude oil are generally done by
the countries, which do not have appropriate reserves of oil and
are incapable of satisfying the domestic consumption demand.
The following is list of the countries with their net import figures
that are the major importers of crude oil in the world
United States of America (12.1 million barrels per day)
Japan (5.3 million barrels per day)

5. China (2.9 million barrels per day)
Germany (2.4 million barrels per day)
South Korea (2.2 million barrels per day)
France (1.9 million barrels per day)
Italy (1.7 million barrels per day)
Spain (1.6 million barrels per day)
India (1.5 million barrels per day)
Taiwan (1.0 million barrels per day)
History
The history of crude oil dates back to the 3rd or 4th century A.D
when the presence of oil was first discovered in China. The oil
that the early Chinese people found was found to have extremely
good medicinal value and was used in the salt form. To extract
that oil from under the earth’s crust, first oil wells of around 243
meters were dug up in that region with the help of bamboo poles
possessing metal tools at their end. The crude oil was also used
for the lighting purposes in Ancient Persia.
When the city of Baghdad was constructed in the 8th century, the
streets of that city were paved with tar that was easily available in
the natural oil fields in that region. With the time, man discovered
new and diversified uses of oil and hence the discovery of new oil
fields became an important requirement. People got to know the
vast amount of oil that was hidden under the earth’s surface as
many geographers started predicting it in that time.

6. All this time oil had a limited use until in 19th century; the process
of distillation of kerosene with the help of coal and rock oil was
invented. Production of oil became commercialized and it started
an era of establishment of oil refineries throughout the world. One
of the first refineries was established at Baku in Russia and it
became the world’s largest oil producing refinery. A Russian
engineer F.N Semyonov built the first ever modern oil well at the
same place in 1848. Up till 1950s coal had dominance among the
primary energy constituents but crude oil took over the leadership
in a short span of time and has still maintained its reputation.
History of crude oil in India
India was not known to the world in the context of crude oil and
it’s by-product production. As late as in 1889, the presence of oil
in India was discovered in Digboi in Assam. First crude oil refinery
in India was set up in Digboi in1901. Then the exploration and
production activities were limited to the North Eastern part of the
country. In 1958 and 1974, two more places for crude oil
production were identified namely Cambay onshore basin and
Bombay offshore basin. Initially the major international companies
were given the job to explore and produce oil in the country but
after the shock in oil prices in 1973, whole of the sector was
nationalized.
Categories of crude oil
The various types of crude oils are classified according to their
geographical originations, sulfur level and also the density of the

7. oils in some cases. For differentiation depending upon the gravity
of oils, the American Petroleum Institute (API) provides with a
basis to measure it’s density, which is called the API gravity. The
crude oils are then termed as ‘heavy’ or ‘light’ oil. They are also
divided as per the sulfur level present in them, as ‘sweet’ or ‘sour’.
But, mostly, crude oil is classified on the basis of location only as
oils from different locations have different characteristics and they
are also named after the places of origin. The main types of crude
oil according to their geographic locations are
North Sea Crudes – Considered as bench mark
API gravity – around 38.5 degrees
Sulfur level - 0.36%
Examples - Brent, Forties, Osberg, North Sea Basket, Ekofisk,
Statfjord and Flotta
West African Crudes –
API gravity - around 35 degrees
Sulfur level – 0.2%
Examples - Bonny Light, Qua Iboe, Brass River, Escravos,
Forcados and Cabinda
Persian Gulf Crudes –
API gravity –around 37 degrees
Sulfur level – 1.08%

8. Examples - Dubai and Oman assessments, Murban, Lower
Zakum, Qatar Land, Qatar marine and Banoco Arab Medium
United States Crudes –
API gravity – variable, around 39.6 degrees
Sulfur level – variable, around 0.24%
Examples - West Texas Intermediate (WTI), Mars MOC and
Mars, P - Plus WTI, WTI Calendar Delta, West Texas Sour
(WTS), Light Louisiana Sweet (LLS), Heavy Louisiana Sweet
(HLS), Engene Island, Wyoming Sweet, Bonito, Mars, Poseidon,
Basrah Light, Alaska North Slope (ANS), Line 63, P-Plus Line 63,
Thums, Kern River
Asia Pacific Crudes –
Examples - Tapis, Belinda, Cossack, Jabiru, North West Shelf,
Mirietc
Crude oil producing countries
The following is the production wise list of major crude oil
producing countries of the world
Saudi Arabia*
Russia
United States
Iran*
Mexico

9. China
Norway
Canada
Venezuela*
United Arab Emirates*
Kuwait*
Nigeria*
United Kingdom
Iraq*
The countries with * sign are the current members of OPEC.
Saudi Arabia is the leading producer of crude oil with the
production figures of 10.37 million barrels per day. The country is
followed by Russia with 9.27 barrels and United States with 8.69
barrels of production. The total produce of crude oil in the world is
75 million barrels per day with the total reserves of crude oil
estimated to be 1 trillion tons. These reserves would finish off in
around 80 years with the same rate of consumption. The OPEC
nations provide around 30 million barrels per day that accounts to
approximately 40% of world production.
Production of crude oil in India
India is not among the major producers of crude oil, as it doesn’t
have much oil reserves. That is why it generally depends on

10. imports of crude oil from other countries. However, the production
of oil and as a result the production of its by-products in India has
increased in the recent past due to exploration and findings of
new oil reserves. India currently has an estimated quantity of 5.4
billion barrels of oil reserves out of which it produces around 0.8
million barrels per day. At this production level, the oil reserves in
India would last for around 29 years. The major oil reserves of the
country are situated at
Mumbai high (Mumbai)
Upper Assam (Assam)
Cambay (Gujarat)
Krishna-Godavari basin (Andhara Pradesh)
Cauvery basin (Tamil Nadu)
Nagaland
Arunachal Pradesh

11. The largest crude oil producing oilfield is the Mumbai high field
that produces around 260000 barrels per day. Among these
production centers, major share of production i.e. 2/3rd share is
bagged by the offshore reserves as compared to onshore
reserves. The refining capacity of crude oil in India is over 2.1
million barrels per day. The refining sector in India is held by both
public and private sector, public sector being the dominating one.
Indian crude oil market
India is one of the non-OPEC countries much dependent on its
imports to fulfill the domestic consumption demand as it has a
much lower level of production. India is a developing country and
the requirement for the oil as a primary energy constituent from
the industries in the country is at its peak. The country has much
depended on coal to satisfy its energy needs in the earlier times
but the use of crude oil and gas is taking over the dominance of
coal with the change in time. Oil and gas contribute to around
45% of the country’s total energy consumption.
India has around 5.4 billion barrels of oil reserves with it and the
domestic production has increased in the recent past to reach the
0.8 million barrels per day mark. Mumbai high is the largest oil-
producing oilfield in India with a production of 2.6 lakh barrels per
day. The refining capacity of crude oil in India is estimated at
around 2.1 million barrels per day. Regarding the consumption
pattern of oil in India, it is the 6th largest consumer country in the
world having a consumption of 2.2 million barrels per day. This
leaves the country with a huge deficit in the demand-supply

12. scenario and thus 70% of the consumption is met through
imports.
India generally imports Oman-Dubai sour grade crude, Brent
dated sweet crude and Bonny light crude. The country imports
over 1.5 million barrels per day that place it at the 9th position
among the largest importers of the world. Though the Indian
production has increased in the recent times, the imports were
raised by 5% making due to the raised Indian demand of around
4.2%. The countries from which India imports crude oil are
Venezuela
Nigeria
Sudan
Iran
Kuwait
The Indian oil-refining sector has been regulated by the
government historically and is still dominated. A new private
sector has emerged after the loosening of control by the
government. The major units pertaining to the oil sector in India
are
Indian Oil Corporation (Public sector)
Oil and Natural Gas Corporation (Public sector)
Reliance India Ltd (Private sector)
Essar Oil Refinery (Private sector)

13. Bharat Petroleum Corporation Ltd (Public sector)
Hindustan Petroleum Corporation Ltd (Public sector)
Manglore Refineries and Petrochemicals Ltd (Public sector)
Market Influencing Factors
Production of the major oil producing countries
Various climatic or political supply fluctuations
World oil demand
Fluctuations in the value of dollar
Imports from various world oil organizations like API, DOE
Refinery fire
Major trading centers of crude oil
The major trading centers of crude oil in the world are
New York Mercantile Exchange (NYMEX)
International Petroleum Exchange of London (IPE)
Tokyo Commodity Exchange (TOCOM)
In India, crude oil is traded at various commodity exchanges
namely Multi Commodity Exchange of India and National
Commodity and Derivatives Exchange Ltd.