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Crude Oil Commodity is “Fungible” Commodity

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Crude oil commodity is valuable because it can be refined to produce everyday products such as gasoline, diesel and a multitude of petrochemicals. – PowerPoint PPT presentation

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Title: Crude Oil Commodity is “Fungible” Commodity


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Crude Oil Commodity is Fungible Commodity
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  • Crude oil commodity is a naturally occurring,
    unrefined petroleum product composed of
    hydrocarbon deposits in natural underground pools
    or reservoirs and remains liquid at atmospheric
    pressure and temperature. Although it is often
    called "black gold," crude oil has a wide ranging
    viscosity and can vary in color to various shades
    of black and yellow depending on its hydrocarbon
    composition. Crude oil can be refined to produce
    usable products such as gasoline, diesel and
    various forms of petrochemicals.
  • Even though most crude oil commodity is produced
    by a relatively small number of companies and
    often located in remote locations far from the
    point of consumption, trading in crude oil on a
    global basis has always been robust. Nearly 80
    of international crude oil is transported through
    waterways in large tankers and most of the rest
    by inland pipelines

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  • What Is Crude Oil?
  • Crude oil is unrefined petroleum. Crude oil
    occurs naturally and is predominantly composed of
    hydrocarbon deposits. Crude oil is valuable
    because it can be refined to produce everyday
    products such as gasoline, diesel and a multitude
    of petrochemicals. Another reason it is
    considered valuable is because its non-renewable
    making it a finite resource.
  • Why Is Crude oil commodity So Valuable?
  • Before the Industrial Revolution, agricultural
    staples like corn and wheat ruled the commodities
    market. Today, however, crude oil and its
    derivatives are the most actively traded
    commodities in the world. Thats not surprising,
    considering oil touches just about every aspect
    of the global economy, in terms of consumer goods
    themselves as well as their production and
    transportation.

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  • Oil is a major component in the manufacture of-
    Plastics Synthetic textiles, Copper Commodity,
    (acrylic, nylon, spandex, polyester) Fertilizer
    Computers Cosmetics Steel In fact, less than half
    of a 42-gallon barrel of oil actually goes to
    fuels production the rest is used to make
    consumer goods fuel oil commodity. Its estimated
    that the average American uses about three
    gallons of petroleum products per day.
  • Although the market for oil is global, oil
    trading has clustered around several primary
    regions. The crude oil in each of these regions
    has slightly different characteristics, typically
    referred to in terms of viscosity (light versus
    heavy) and sulfur content (sweet versus sour).
    Each of the major trading regions has established
    benchmarks to track price movements in oil
    commodities

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  • West Texas Intermediate (WTI), which is a light
    sweet crude oil, with gravity of around 40 on the
    American Petroleum Institute (API) gravity scale
    and low sulfur content.
  • Brent Crude is a light sweet crude oil from the
    North Sea. Its gravity is similar to WTI, but its
    sulfur content is slightly higher. From an oil
    investing point of view, its closest in quality
    to WTI.
  • Dubai Crude, also known as Fateh, is denser
    (heavier) than both WTI and Brent and has a
    higher sulfur content, making it a sour crude in
    Europe Commodity. Its useful in oil trading as a
    benchmark for oil shipments in the Middle East.

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