Presentation on oil trend and its impact
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The document discusses crude oil trends over the last three years and their impact on the Indian capital markets. It provides data on the top crude oil producing and consuming countries. It then discusses how OPEC influences prices through controlling supply. Fluctuations in supply and demand, natural disasters, production costs, and storage can also cause oil price volatility. A rise in crude oil prices increases India's current account deficit and inflation, while a fall lowers transportation and production costs for companies.
Presentation on oil trend and its impact
- 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
- 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.