Crude oil is petroleum that is acquired directly from the ground. Crude oil was formed millions of years ago from the remains of tiny aquatic plants and animals that lived in ancient seas. Ancient societies such as the Persians, 10th century Sumatrans, and pre-Columbian Indians believed that crude oil had medicinal benefits. Around 4,000 BC in Mesopotamia, bitumen, a tarry crude, was used as caulking for ships, as a setting for jewels and mosaics, and as an adhesive to secure weapon handles. The walls of Babylon and the famed pyramids were held together with bitumen, and Egyptians used it for embalming. During the 19th century in America, an oil find was often met with dismay. Pioneers who dug wells to find water or brine, were disappointed when they struck oil. It wasn't until 1854, with the invention of the kerosene lamp, that the first large-scale demand for petroleum emerged. Crude oil is a relatively abundant commodity. The world has produced approximately 650 billion barrels of oil, but another trillion barrels of proved reserves have yet to be extracted. Crude oil was the world's first trillion-dollar industry and accounts for the single largest product in world trade.
Crude Oil futures and options are traded at the New York Mercantile Exchange (NYMEX), division of the CME Group, the ICE Futures Europe, and the JSE Securities Exchange. Futures are also traded at the Dubai Mercantile Exchange (DME), the Multi Commodity Exchange of India (MCX), the Thailand Futures Exchange, and the Tokyo Commodity Exchange (TOCOM). The NYMEX trades two main types of crude oil: light sweet crude oil and Brent crude oil. The light sweet futures contract calls for the delivery of 1,000 barrels of crude oil in Cushing, Oklahoma. Light sweet crude is preferred by refiners because of its low sulfur content and relatively high yield of high-value products such as gasoline, diesel fuel, heating oil, and jet fuel. The Brent blend crude is based on a light, sweet North Sea crude oil. Brent blend crude production is approximately 500,000 barrels per day, and is shipped from Sullom Voe in the Shetland Islands.
Prices - NYMEX West-Texas Intermediate crude oil prices (Barchart.com symbol CL) traded sideways below $100 a barrel the first half of 2013 and posted the low for the year in April at $85.61 a barrel. Crude oil prices were pressured in early 2013 as U.S. crude oil production in April 2013 rose to a 21-year high of 7.326 million barrels per day. Also, U.S. crude supplies surged after EIA data in April 2013 showed U.S. crude inventories rose to a 22-year high of 388.6 million barrels, which was +10.7 percentage points above the 5-year average. Despite the increase in U.S. crude output and supplies, the downside for crude prices remained limited due to overall strength in U.S. economic data and the rally in the S&P 500 to a record high, which bolstered optimism about the global economic outlook and energy demand. Fund buying during the summer of 2013 pushed crude prices higher and in August they climbed to a 2-1/2 year high of $112.24 a barrel. Concern that civil unrest in Egypt would escalate and threaten supplies of crude through the Suez Canal boosted prices, along with strong demand from China, the world's second-biggest crude consumer, after China July crude imports rose +13% m/m to a record 25.9 MMT. However, geopolitical risks receded during Q3 of 2013 and crude prices retreated back below $100 a barrel. Also, U.S. crude production continued to climb after crude output in December rose to a 25-year high of 8.111 million barrels a day. Crude prices bounced slightly into year-end and finished 2013 up +7.2% at $98.42 a barrel.
Supply - World crude oil production in 2012 (latest data) rose +1.8% yr/yr to 75.525 million barrels per day, which was a new record high. The world's largest oil producers in 2012 were Russia (with 13.1%), Saudi Arabia (13.0%), the United States (8.6%), Iran (4.5%), China (5.4%), and Canada (4.1%). U.S. crude oil production in 2013 rose +15.4% yr/yr to 7.478 million barrels per day. Alaskan production in 2013 fell -2.1% yr/yr to 515,000 barrels per day, the lowest level since 1977 and far below the peak level of 2.017 million barrels per day seen in 1988.
Demand - U.S. demand for crude oil in 2013 rose +2.2% yr/yr to 15.321 million barrels per day, which was well below the 2004 record high of 15.475. Most of that demand went for U.S. refinery production of products such as gasoline fuel, diesel fuel, aviation fuel, heating oil, kerosene, asphalt, and lubricants.
Trade - The U.S. is still highly dependent on imports of crude oil to meet its energy needs even though U.S. imports in 2013 fell -9.4% yr/yr to 7.729 million barrels per day, down from the 2005 record high of 10.126.
Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.