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Education Section: Trading

How is oil traded?

To facilitate trading on world stock exchanges, the oil market uses specific local oils as benchmarks – Nymex (New York Mercantile Exchange) in the US uses West Texas Intermediate, in London the International Petroleum Exchange uses North Sea Brent and in Singapore Tapis is used.  The Energy Information Administration (EIA) uses the Imported Refiner Acquisition Cost, the weighted average cost of all oil imported into the US as their "world oil price".

 

In 1960, some of the major oil producing nations set up OPEC (Organisation of the Petroleum Exporting Countries). Its mission – to achieve stable oil prices which are fair and reasonable for producers and consumers.  It uses eleven crude oil grades and takes an average of their prices to produce its own reference figure.  Today its members are:

 

Algeria Iran Libya Saudi Arabia
Angola Iraq Nigeria United Arab Emirates
Indonesia Kuwait Qatar Venezuela

 

Together they hold over 78% of the world’s proven oil reserves and supply 42% of the world’s total oil production and half of the exports.

 

 

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Who exports oil ?

Click on the production regions below to see where oil is exported to:

 

 

 

 

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Who imports oil?

Click on the region below to see where it gets its oil from:

 

 

 

How does the oil get to the refinery?

Crude oil is exported either by dedicated pipeline or by ship. Oil producing countries also refine oil and export the resulting products by sea in specially designed vessels which are usually smaller than those used to carry crude oil.

 

Vessels are categorized by their deadweight (dwt), which is the largest weight of cargo, bunkers and stores that a vessel can carry. Crude oil is carried in vessels up to 440,000 dwt. These vessels are up to 380 metres long, 68 metres wide, and reach 24.5 metres below sea level when fully laden.

 

Category

DWT

ULCC/V-Plus

320,000+

VLCC

200,000 - 320,000

Suezmax Tankers

120,000 - 200,000

Aframax Tankers

79,000 - 120,000

Panamax Tankers

Up to approx 80,000

Handysize Tankers

Up to approx 45,000

Small Tankers

Up to approx 10,000

 

Each of these categories of vessel satisfies particular requirements, which is reflected in the markets in which they operate.


 

Source: Clarksons February 2006

 

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What are the major oil trading lanes?

 

 

In the industry, these main trade lanes are referred to as:

 

From the Arabian Gulf:

Arabian Gulf – US Gulf  AG/USG  
Arabian Gulf – China AG/CHINA  
Arabian Gulf – Japan AG/JAPAN  
Arabian Gulf – Singapore AG/SINGAPORE  
Arabian Gulf – Europe AG/UKC (UKC = UK/Continent)

 

From West Africa

West Africa – US Gulf WAF/USG  
West Africa – China WAF/CHINA  

 

From North Sea

North Sea – Canada NSEA/ECC (ECC = East
    Coast Canada)

 

Click here to view other world trade lanes

 

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