Black Gold As The World's Economy Indicator

Crude oil as well as the currency and the gold is one of the most indicators of almost all processes of world economic systems. The volatilty of quotes follows the economic and political events. However, due to the specification of oil deals and oil consumers there is allways some kind of time lag, which makes the oil deals much more delicate investment instrument.

Crude oil blends

Brent (Brent Crude) - it's a benchmark grade of oil, produced from in the North Sea. The grade name comes from mine field in the North Sea, opened in 1970. Actually, the crude oil blends can be called Brent, Oseberg and Forties between the coasts of Norway and Scotland. Brent - is one of the most oil brands, which are being sold on the main world oil bourses. The Brent oil price is the basis for priceforming since the 1971 for about 40% of oil grades all over the world, particularly, for russian oil Urals. That's why this grade is called «benchmark». The price of oil used to be by 1 dollar/bl lower than the WTI price and by 1 dollar/bl higher so called «OPEC Reference Basket of crudes». However, this paruty rate was changed in 2007 and the Brent oil is qouted with the WTI premium. At a present time is being disscussed the justification of further using the Brent oil brand as a basis for price setting on the world market. This is primarly due to the weakening crude production in the North Sea, which leads to the fall of liquidity and the confusions during the price setting both for the crude oil blends and other oil brands.

Urals - sour crude oil grade (sulfur content about 1.3%), which represents a crude oil blend, produced in Khanty-Mansiisk autonomous district and Tatarstan. Main producers of Urals oil are the following companies: «Rusneft», «Lukoil», «Surgutneftegaz», «Gazpromneft», «TNK-VR» and «Tatneft». The russian oil price is determined by discounting of prices for Brent, as russian oil is believed to be less qualified due to high sulfur content and hard cyclic carbonhydrates. Recent time in Russia were taken actions to raise the quality level of Urals oil by excluding the sour tartar oil (in Tatarstan Republic are going to be built new distillation capacities to make gasoline from a local oil in order not to run it in the pipeline.) West Siberian oil has acceptable quality. Abroad it is known as Siberian Light brand. In Russia a futures for Urals grade oil is being traded in FORTS market at the RTS stock exchange.

WTI (West Texas Intermediate) - oil brand, which is produced in Texas (USA), the consistence is 40° API, sulfurcontent - 0,4-0,5 %, mostly used for gasoline manufacturing and that is why this oil grade is in strong demand, especially in the USA and China.

The crude oil market participants

Petroleum producers
Mostly the crude oil reaches the market from oil-extracting companies, which can be both small companies and huge corporations. It's reasonable that company's influence on the market depends on the volume of delivered oil. Consequently, other market participants pay a lot of attention to the gold producers activity.

Industry
To this can be reffered industrial companies of all economic sectors and oil refining and processing companies, often it can be petrolium-refining firms themselves. This scheme is called vertically-integrated structure. Similar companies produce crude oil, reproduce it to an end product (gasoline, fuel etc.), but distribute it in their own retail chain.

Commodity and crude oil markets
In some countries at the most huge markets there are separste sectors, which are busy with trading, particularly, with the crude oil.

Investors Investors in the market have different interests, which leads to the deposits in different forms to the instruments, connected with the crude oil. Nomally, the most popular instrument among the investors of gold market are the futures.

OPEC

OPEC - Organization of Petroleum-Exporting Countries - international intergovernmental organisation, launched by petroleum-refining powers in order to stabilize the oil prices. The members of this organisation are the countries, whose economy depends on the profit from crude oil exports. OPEC as an instant organisation was created on the conference in Bagdad in the 10-14 of September 1960. Primarily the organisation entered following countries like Iran, Iraq, Kuwait, Saudi Arabia, Venezuela (the initiator of launching). To these five countries, created the organisation later joined more 9 countries: Katar (1961), Indonesia (1962-2008, 1 November 2008 left the OPEC), Libya (1962), United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973-1992, 2007), Gabon (1975-1994), Angola (2007).

At the present time OPEC includes 12 members, taking into account changes in the content in 2007 - a new member of organisation Angola and returning back of Ecuador. In 2008 Russia annouced about its readiness to become an istant observer in the cartel.

Crude oil trading
Produced oil in the world is far non-uniform in quality and consequently in price. The prices depend on the consistence and different paraffin additives, added to the oil blends. The standard for the prices serves the «Brent» oil grade, which is similar in composition to one that is bieng extracted in the North Sea, and the delivery contarcts are being concluded at the London raw exchange market. The price for this grade is often set up by Mass Media.
Mostly, this price is a contarct value for «brent» oil in the next month. When signing such contarct - futures, the buyer obliges to pay and accept delivered product, and the seller - to deliver it to the place required.
Fututres contracts are bieng concluded at appropriate bourses and payed away daily, according to the current market price. The minimal contract volume - 1000 barrels.
The main trading grounds of oil deals are the leading trade stock exchanges as: NYMEX, CME, РТС, LOE.

Oil Value Oil was newsmaker of the last year in a row with financial crisis. Reached the maximum of 147,26 US dollars for barrel on June, 11 2008, it lost 70 % of its price for a half of the year. Analytics supposed that the main reason of falling is overheat of the market by spekulative capital. Looking from the fundamental point of view 100 Us Dollars for barrel was acceptable but 140 US Dollars for barrel oil couldn´t cost.
In the end to the end of 2008 oil stabilized in diaposone 40-50 US Dollars for barrel, and to the spring of this year it fell down to 38-42 US Dollars for barrel. Meanwhile it came untied from the dynamic of american currency, that had been significant for it in first half-year. It is difficult to say if oil market groped the bottom. If a half of the year it was outbided then now it is resold. That time the fair price was 101 US Dollars and now with a glance of the situation in world economy new fair price is 70-90 US Dollars for barrel. Though hope of oil quotations reach those level in 2009 are groundless.
Just that fundamential factors played one of the main part in oil quotations´ fall in 2008. Financial crisis entailed serious problems in real sector of economy. Fuel demand began to decrease. At the same time when oil quotations rose in the first half-year of 2008, this rise was not corroborated by the oil demand.
In summer the biggest world agencies and investment companies predict that oil price will never go down 100 US Dollars for barrel. Moreover there was a forecast that oil will go up to 150-200 US Dollars for barrel. Such predictions are not casual if the fact that the biggest investment companies had their own positions on the oil market and recommendations´ rise was on their behalf, is taken into consideration.
Major Funds´ and investment companies´ participation in race on oil market became one of the reasons of such fast price fall. However at that time financial crisis took the world and nobodies cared about the fraud on the primary market. Broken out liquidity crisis forced to sell all the assets including primary contracts. Weak macroeconomic data and waiting for reduction of demand for fuel all over the world aggravated the situation.

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