Sample Report - Oil report

Sample Report - Oil report - FUTURE OF OIL PRICES JUNE 2ND...

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Oil has been used since ancient times, where it was mostly used as liniment and medicine. As fuel, oil was originally used as kerosene for lighting, replacing animal vegetable and coal oils. Its biggest use however came with the creation of automobile. Almost all forms of locomotion – cars, trucks, buses, trains, ships and airplanes – are fuelled by oil, diesel and gasoline. Today oil is used just about everywhere houses, vehicles, roads, clothing and shoes manufactures etc. Despite having only a few options to pump gas into your car, there are actually more than 160 internationally traded crude oils. Dif- ferent crude oils have different characteristic, quality and price. The two most commonly trad- ed crude oils are WTI (West Texas Internation- al) and Brent. WTI is used as benchmark for oil pricing and usually commands a higher price than Brent. WTI is a sweet crude oil that is used to refine larger portions of gasoline, while Brent is a sweet light crude oil and used for making both gasoline and middle distillates (product made from condensation of vapours during distillation). WTI has a huge demand in the United States, while Brent is more suitable for the North-western European market. Both WTI and Brent are highly correlated and are one of the most popular commodities traded on financial markets. Aside from all the differences in oil characteristics, prices are commonly H I S T O R Y J U N E 2 N D 2 0 1 1 F U T U R E O F O I L P R I C E S
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determined by traders that bid on oil futures con- tracts in commodity markets. There are many factors that cause oil prices to fluctuate, some factors look at current supply in terms of output, especially the production quota set by OPEC, while others look at oil reserves. Investors look at what is available in U.S. refineries and what is stored at the Strategic Petroleum Reserves. World crises could also make oil prices very volatile. This happened in March 2011, when investors were alarmed about the unrest in Libya, Egypt and Tunisia. It also occurred in July 2006, when the Israel – Lebanon war raised fears of potential threat of war with Iran. In 2008, there was a tre- mendous spike in oil prices due to hedge funds putting billions of dollars into oil commodity and overbidding demand while the production stayed relatively the same. C U R R E N T T R E N D S Page 2 F U T U R E O F O I L P R I C E S Before 2011, many investment banks and commodity analysts took a bullish stance on crude oil prices based on economic pressures in the U.S. and high demand from commodity hungry emerging markets. These predictions were correct as oil prices sharply increased. The supply of oil is critical to many countries since demand has increased at a rapid pace. Crude oil and liquid fuels consumption has grown from 2.4 million bbl/d in 2010 to 86.7 million bbl/d, the second largest annual increase in at least 30 years. One of the major increases occurred in
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This note was uploaded on 04/03/2012 for the course FINANCE 4501 taught by Professor Loisking during the Winter '11 term at York University.

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Sample Report - Oil report - FUTURE OF OIL PRICES JUNE 2ND...

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