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We all come into contact with the commodity market in one way or another every day. One of the most common raw materials we have contact with is energy, and especially oil that in one way or another affects our lives.

Oil is part of the energy market, and is the most liquid hard commodity traded by investors, speculators, producers and refineries. In this text, we go through the oil market, which players there are and how it is possible to trade with this raw material. For the most available soft ingredients, we have a special article about it.
Also check out our article on what determines the price of oil (coming soon). Below is the oil price for Brent, crude and cushing. We also address the largest players, international oil companies and who means something in the market.

Find the latest oil price below
The oil prices are not seasonal adjusted.
Crude oil West Texas Intermediate: [] USD per barrel, uppdaterad 1970-01-01 01:00:00
Crude oil Brent Europe: [] USD per barrel, uppdaterad 1970-01-01 01:00:00
No. 2 Heating Oil New York Harbor: [] USD per gallon, uppdaterad 1970-01-01 01:00:00

Who are the biggest players in the oil market?

The world market for oil is complex, with both governments and private companies participating in the work of moving oil from consumers. State-owned national oil companies (NOCs) control most of the world’s proven oil reserves. Today, their share of ownership is about 78 percent, and they account for about 58 percent of the world’s oil production. International oil companies (IOCs), which are often public companies whose shares are traded on various stock exchanges, own the rest of the global oil reserves and are responsible for other production.

There are three types of companies that supply crude oil to the global market. Each type has different operational strategies and production-related goals:

Shell Logo

International Petroleum Companies (IOC)

This includes companies such as ExxonMobil, BP and Royal Dutch Shell. These companies are wholly owned by investors and primarily try to increase their shareholder value. As a result, they tend to make investment decisions based on economic factors. These companies are usually quick to develop and produce the available oil resources. This is so that they can sell their production on the global market. Although these producers are affected by the laws of the countries in which they produce oil, ultimately all decisions are made in the interests of the company and its shareholders, not the interests of a government.
Saudi Aramco logo

National Oil Companies (NOC)

This type of business can be considered as an extension of a government or an authority. This category of companies includes companies such as Saudi Aramco (Saudi Arabia), Pemex (Mexico), China National Petroleum Corporation (CNPC) and PdVSA (Venezuela), among others. These companies support their governments financially and sometimes strategically. They often supply fuels to their domestic consumers at a lower price than they could get from the international market. These companies do not always have incentives, funds or intentions to develop their reserves at the same rate as international oil companies. Due to the different goals of their country’s governments, these NOCs have goals that are not necessarily market-oriented. NOC’s goals often include employing citizens, promoting a government’s domestic or foreign policy, generating long-term revenue to pay for government programs, and delivering cheap domestic energy. All NOCs belonging to members of the Organization of the Petroleum Exporting Countries (OPEC) are included in this category.

NOCs with strategic and operational autonomy

These NOCs act as companies and do not act as an extension of the government of their country. This third category includes Petrobras (Brazil) and Statoil (Norway). These companies often balance profit-oriented problems and the country’s goals with the development of their corporate strategy. Although these companies can support their countries’ goals, they are primarily commercially driven. It is also not uncommon for the shares of these companies to be traded publicly.

In 2012, 100 companies produced 84 percent of the world’s oil. NOCs accounted for 58 percent of global oil production. Today, that number has decreased a bit but NOCs are still responsible for the majority of all oil production.

OPEC brings together the world’s most oil-rich countries

OPEC is a group that includes some of the world’s most oil-rich countries. Together, these countries controlled about 73 percent of the world’s total proven oil reserves * in 2013 and they accounted for 40 percent of the world’s total oil supply that year. Each OPEC country has at least one NOC, but most also allow international oil companies to operate within their borders.

OPEC seeks to manage oil production in its member countries by setting oil production targets for each member state. Compliance with OPEC quotas is mixed, as production decisions are ultimately in the hands of individual Member States.

In general, there are three main factors that determine OPEC’s how effectively the organization can influence the oil market:
+ How reluctant or incapable consumers are not to use oil.
+ How competitive non-OPEC producers become when the price of oil increases.
+ How efficiently OPEC producers can supply oil compared to non-OPEC producers.

OPEC’s oil exports accounted for about 62 percent of the total seaborne crude oil traded internationally in 2013, according to data from Lloyd’s List Intelligence tankers tracking service. The difference between market demand and oil supplied by non-OPEC sources is often referred to as “call on OPEC.”

Saudi Arabia, the largest oil producer within OPEC and the world’s largest oil exporter, has historically had the largest share of the world’s reserve production capacity. As a whole, OPEC maintains the world’s entire reserve capacity for oil production. It is generally not cost-effective for international oil companies to develop and maintain spare reserve production capacity, as the IOC’s business model maximizes revenue by continuing to produce oil as long as the price of selling that commodity is higher than the cost of bringing an extra barrel of oil to market.

The Energy Information Administration, EIA, defines reserve capacity as the volume of oil production that can be put into operation within 30 days and maintained for at least 90 days.

Reserve capacity can also be considered as the difference between a country’s current oil production and its maximum oil production capacity. If a disturbance occurs, oil producers can use reserve capacity to moderately increase world oil prices by increasing production to compensate for lost oil supplies.

Proven reserves are the amount of oil in a certain area that is known with reasonable certainty, and which with today’s technology can be extracted cost-effectively. The world’s proven oil reserves are about 1.6 trillion barrels and global oil production is on average about 90 million barrels per day.

The world’s largest oil and gas company

The list below is ranked by revenue.
1. China Petroleum & Chemical Corporation (Sinopec)
2. Royal Dutch Shell
3. China National Petroleum Corp (CNPC)
4. BP Plc
5. ExxonMobil
6. Total
7. Chevron
8. Rosneft
9. Lukoil
10. Phillips 66

What is the difference between American shale and Brent oil?

Slate oil, American shale or shale oil – dear children have many names. To further complicate the situation, shale oil can mean two different things that are very different. On the one hand, there is a mineral called oil shale which actually consists of a solid material called kerogen. This mineral occurs mainly in solid form. There have been attempts to use this as a fuel in Estonia, among other places. We continue to call this type of oil shale to avoid confusion.

The second, newer and more popular meaning of shale oil is crude oil extracted from fine-grained shale that has a high porosity and contains oil but very little permeability. With porosity, such slate can contain a lot of liquid and gas and often does. But the pores are not connected so that the rock has low permeability and the liquids will not migrate very much through the shale layers. Unlike oil shale, this shale oil “contains a lot of liquids and gas. Oil shale contains only the solid kerogen which is not like crude oil and which retorts is converted into very reactive unstable liquids.

In shale oil, the hydrocarbons containing them have no unusual properties and are quite stable. When it comes to shale oil, all that needs to be done to start production is to break up the shale layers and thereby create open channels through which the existing liquids and gases can flow. The process is usually called fracking. Normally, American shale oil is considerably cheaper than Brent oil and it can be used for fewer industries before it is refined.

Chemically, shale and Brent are identical

This type of liquid from dense shale is chemically identical to crude oil. It is often quite easy, something that is generally a favorable attribute. The content gives a high proportion of petrol through diesel material. It is easily refined with the use of conventional equipment without design features. Ordinary refineries do not tend to have any problems accepting this, provided that their plant is focused on crude oil of similar quality.

The problem with shale oil is the cost of production. It takes a lot more money to extract a fat shale oil compared to a regular light crude oil. While shale oil is used in the United States, other countries are still dependent on conventional crude oil due to technical limitations and the cost factor. Shale oil can thus be substituted with WTI, West Texas Intermediate, which is the most common crude oil traded in the United States. WTI is mainly used to make gasoline, while Brent is used to make both gasoline and other distillates. WTI is generally traded at a higher price, while Brent conditions a lower price in the trading market. WTI has a huge demand in the US, while Brent is more suitable for the northwestern European market.

Shale oil is more expensive to extract but is sold cheaper

Fracking is an important technological advance for the oil and gas industry. In addition to opening up additional amounts of natural gas and oil for production, fracking allows mining companies to recycle shale oil from deposits that were impossible to process just a few decades ago.

But the new technology has also introduced new costs for the oil extraction process. Shale oil is significantly more expensive to extract than conventional oil. Costs can range between $ 40 and $ 90 per barrel, sometimes significantly more. This should be set against the cost of extracting a barrel of conventional oil. Saudi Arabia can produce oil for as little as $ 10 per barrel, while the global average price is usually considered to be between $ 30 and $ 40 per barrel. Producing oil at sea, something that Norway, the Netherlands and the United Kingdom, for example, do, is significantly more expensive.

Norway’s importance in the oil market

Oil is abundant in the North Sea, which means that countries such as Norway and Denmark have historically been able to benefit from a high oil price, something that is needed because deep-sea drilling is very expensive. Sweden has no part of the North Sea deposits, and has no own producing oil deposits, even though several attempts have been made to extract oil on Gotland.

The oil extracted in the North Sea is called Brent, sometimes also Brent Crude or Brent Blend. As an oil, it differs from the most traded oil, WTI, or West Texas Intermediate, but they are both of the Light Sweet type, which means that the oil has less than 0.5 percent sulfur, and that it has a relatively low viscosity and density. Sweet light oils are highly sought after and are paid higher than heavier oils which are more difficult to process and refine into petrol and diesel.

Brent is therefore, just like WTI, one of the reference oils against which other types of oils are priced. Brent is traded just like WTI on the major commodity exchanges around the world, but unlike WTI, Brent is physically settled. There is thus no physical delivery, which means that we do not see the delivery and stock problems that sometimes arise with WTI.

Oil is a significant proportion of Norway’s economy. Between 40 and 70 percent of the country’s exports can be linked to either oil or gas, although the figures are likely to have changed at the turn of the year. Norway was previously one of the ten largest producers of oil and gas, but has now fallen down the table. Norway comes in 15th place, after countries such as Venezuela, Mexico, Nigeria and Angola, but before countries such as Qatar, Algeria, Oman, Libya and the United Kingdom.

Country Million barrel/day Market share
USA 19.51 19 %
Saudi Arabia 11.81 12 %
Russia 11.49  11 %
Canada   5.50   5 %
Cina   4.89   5 %
Iraq   4.74 5 %
UAE   4.01   4 %
Brazil  3.67   4 %
Iran   3.19   3 %
Kuwait   2.94   3 %
Total top 10 71.76   71 %
Totalt 100.63

In 1959, the first oil discovery was discovered in the North Sea, in Gröningen outside the Netherlands. Phillips Petroleum then made the first commercial discovery in 1963. Norway then began issuing exploration licenses in 1963. However, the first drilling, which failed, was made in 1966. Since the 1969s, oil has been produced from the Norwegian continental shelf when Phillips Petroleum discovered the Ekofisk oil field, which become one of the world’s largest oil fields.

How the oil is produced?

Since the end of the era of “light oil”, the oil industry has begun to look for hydrocarbon deposits in areas where a few decades ago were not profitable due to its high costs and risk, including offshore. The search for oil (exploration) below generally comprises a number of different phases, and it differs somewhat depending on the type of deposit in question. However, the main features are the same.

The first phase consists of the collection of bibliographic, seismic, badymetric, etc. information about the area for which exploration permits have been obtained. In the second phase of exploration, the seismic acquisition takes place. Companies are beginning to search for the presence of underground geological formations where there may potentially be oil or gas. This is usually called “seismic acquisition” in English. In connection with this, many deposits or so-called leases fall away as it often turns out that there is no oil at all, or that it is not economically possible to extract the oil that is available at a profit.

Once it has been established that there is an oil deposit, and that it is economically justifiable to extract it, work begins. It’s time to start preparing the drilling site, this is done by creating roads and more. Only then is the drilling rig brought to the site, which is usually done with a fleet of about 20 trucks. Now is the time to build the infrastructure needed to extract the oil and natural gas that is more than a mile underground. A well is drilled straight into the ground under the drill pad. The first step is to drill what is called the surface hole down to a depth of 100 feet below the deepest known aquifer. A steel casing is then cemented on site so there is no risk of contaminating the groundwater.

After this, the “long hole” is drilled to a depth of about 1000 meters above the underground area where oil and natural gas are found.

Unlike vertical drilling, horizontal drilling minimizes the impact and extent of disturbance over the ground by allowing the drillers to use only one multi-well drill cushion instead of multiple cushions with a single well each. These technological advances mean that today’s wells are fewer in number and also smaller than they used to be just 10 or 20 years ago.

When the target distance has been reached, the drill pipe is removed and the steel pipe is pushed to the bottom. This “well casing” is cemented in place. Rigorous tests are performed to ensure that the pipe is impermeable before any production of natural gas or oil can take place. When all drilling is complete and a production site remains that is the same size as a two-car garage. The oil must then be transported to a refinery, which is often done with the help of tankers, trucks or by connecting the source to a pipe line.

When all extracted oil and natural gas has been produced, the law requires that the well is permanently plugged and the ground is restored to what it was before drilling began. The land can then be used for other activities and there are no signs that a well was once there.

3 key players

There are three types of companies operating in the oil market, upstream, midstream and downstream. There are many companies working in all parts, such as ExxonMobil (NYSE: XOM), while others only work in one part of the chain.

Upstream is a company that specializes in exploration. These companies worked to find underground crude oil fields. They then drill exploration wells, but they also drill in established wells to extract oil and gas. Here you will find, for example, Swedish listed companies such as Lundin Energy https://www.lundin-energy.com/sv/, Africa Oil, Thetys Oil and American companies such as ConocoPhillips (NYSE: COP).

Midstream. The companies in this segment work with transport, storage and processing of oil and gas. Once the resources have been recovered, they have to be transported to a refinery, which is often located in a completely different geographical region compared to the oil and gas reserves. Transportation can include everything from tankers to pipelines and trucks. Companies working in this segment include Teekay, Frontline, Tsakos Energy Navigation (TNP), Nordic American Tanker (NAT) and Kinder Morgan (NYSE: BMI).

Downstream. The companies in this part of the value chain work to refine the products that the others have found. These are generally refineries, but are also about marketing and commercial distribution of these products to consumers and end users in a number of forms including natural gas, diesel oil, gasoline, gasoline, lubricants, kerosene, jet fuel, asphalt, fuel oil, etc. Companies in this segment are for example, Marathon Petroleum (NYSE: MPC), Delek US Holdings, (NYSE: DK) and Tesoro (NYSE: TSO).

Where are the largest ports for oil transport?

Oil is rarely needed where it is extracted. For this reason, it must be transported, often long distances, and often by tanker. To find out which are the most important ports in the oil sector, we start by looking more closely at how oil is transported around the world.

3 major transport routes for the oil

Most people are familiar with the Panama Canal, which connects the Atlantic with the Pacific Ocean. However, this is only one of all the canals and transport routes along which the oil is carried. The map shows that there are two major transport routes, the Strait of Hormuz and the Strait of Malacca. From this it comes naturally that the larger ports are the ports from which the oil begins and ends its journey.

The Strait of Hormuz and major oil ports in its vicinity

Hormuzsundet knyter samman Omangulfen med Persiska viken. Varje dag passerar ungefär 117 miljoner fat råolja genom Hormuzsundet. Den största exportören av olja i denna region är Saudiararabien. Saudiarabien har emellertid inte bara en hamn, det finns ett antal sådana vilka tabellen nedan visar. Enligt tabellen är Al Juaymah Terminal den hamnen med störst kapacitet. Andra större hamnar i regionen är Port of Fujairah i Förenade Arabemiraten och Jeddah Islamic Port.

Larger oil terminals in Saudi Arabia

However, this whole region is very busy. A traffic jam has led to a doubling of shipping prices there.

Now on to the Strait of Malacca, which is the longest and one of the busiest straits in the world. The Strait of Malacca connects the Indian Ocean with the South China Sea. The majority of the tankers that pass through the Strait of Malacca do so on their way to China, Japan and other countries in Asia and the Pacific. Given the fact that China is currently the largest importer of crude oil, it is safe to assume that the busiest destination for transportation of crude oil must be somewhere in China. According to the China shipping database, we see that Ningbo-Zhoushan with a crude oil terminal with a capacity of 250,000 tons appears to be the largest and thus the busiest destination port in China. However, there are reports that the port of Shanghai is the largest recipient of oil in China.

Comparison between the ports of Shanghai and Ningbo-Zhoushan

In 2017, total imports of crude oil to the EU amounted to 565.7 million tonnes. The largest imports came from Russia (163.1 million tonnes), Norway (61.4 million tonnes), Iraq (44.0 million tonnes), Kazakhstan (39.7 million tonnes) and Saudi Arabia (35.6 million tonnes). Russian imports have remained relatively stable over the past decade, while imports of crude oil from Norway have almost halved during the period 2000-2017, from 114.9 million tonnes to 61.4 million tonnes. This means that much of the oil imported into the EU comes through pipelines and other types of pipeline systems.

Oil ports in Europe

In 2017, total imports of crude oil to the EU amounted to 565.7 million tonnes. The largest imports came from Russia (163.1 million tonnes), Norway (61.4 million tonnes), Iraq (44.0 million tonnes), Kazakhstan (39.7 million tonnes) and Saudi Arabia (35.6 million tonnes). Russian imports have remained relatively stable over the past decade, while imports of crude oil from Norway have almost halved during the period 2000-2017, from 114.9 million tonnes to 61.4 million tonnes. This means that much of the oil imported into the EU comes through pipelines and other types of pipeline systems.

Most of the oil that comes to Europe through transport vessels, just like most other things, goes to one of three major ports. The port of Rotterdam, the port of Antwerp and Sjönuren shipping, regardless of type, to European ports. The Czech Republic, Luxembourg, Hungary, Austria, Slovakia and the EFTA countries Liechtenstein and Switzerland do not have seaports, which is why they are missing in the compilation.

The largest ports in the United States

The US market has several major oil ports. The largest port for the import of crude oil is Louisiana Offshore Oil Port, the only port along the Gulf Coast that can receive so-called supertankers. The largest ports for crude oil exports are those in Houston and Corous Cristi, both located in Texas. However, these ports cannot accommodate larger vessels, but transport them to Very Large Crude Carriers waiting offshore.

Trends in the oil market

Those who trade in oil do not just have to keep track of what happens to the oil price. There are a number of different things that affect development. One of the more well-known trends is the number of active rigs in the US and globally, but that is just one of many things that can affect.

Below we have listed some of the things that may have an impact on the oil price.

OPEC production refers to the supply of oil specifically from countries within the Organization of Petroleum Exporting Countries (OPEC) https://www.opec.org/. There are currently 14 OPEC members, including three of the top five oil exporting countries – Saudi Arabia, Iraq and the United Arab Emirates. Qatar’s membership in OPEC expired in 2019 and was not renewed. OPEC has been very relevant during the Corona crisis, mainly because the organization has tried to work to get its members to reduce their production and not flood the world market with oil.

Fracking is a method of extracting natural gas and petroleum found during deep rock formations. The technique involves injecting fracking fluid – essentially water with certain chemical additives – into rock formations at high pressure to crack the rock and enable the release of hydrocarbons. Fracking is popular in the US while plans to restart fracking in October 2018 have faced legal challenges and caused small-scale seismic activity. Fracking is a much more expensive method of extracting oil than the traditional method, but in return provides a better economy over time as not as many drillings are needed. Due to the low price of oil in the spring of 2020, many of the companies operating with this technology have chosen to close down their operations. Already in the past, many of these companies had difficulty paying the interest rates on their bond loans. For this reason, many market observers speculate that there will be major structural deals among the packing companies.

Oil demand is the nation’s oil consumption and the opposite of oil supply. The largest oil-consuming country in the world is the United States, which consumed 19.88 billion barrels (Gbbl) in 2017. China came in second place with an oil demand of 13.23 GB. India (4.69 Gbbl), Japan (3.99 Gbbl) and Saudi Arabia (3.92 Gbbl) are the five largest. A change in the consumption pattern will affect oil demand, and may thus affect the oil price.

Energy conversion is the long-term structural change of a nation’s energy mix. For example, the transition from oil and coal to natural gas is defined as an energy transition, as is the incorporation of renewable energy sources to compensate for the production of fossil fuels. Many governments and companies have put forward energy policies to promote an energy transition to more renewable and cleaner energy sources in recent years. However, the low oil prices in recent years have reduced the interest in alternative, renewable energy sources as it is more difficult to recoup them financially.

How to start trade oil?

Oil is the world’s most traded commodity and there is not just one way to invest or speculate in a change in oil prices. In fact, there are at least 160 different types of crude oil contracts traded worldwide on various exchanges. In addition, there are a variety of oil derivatives, for example diesel, petrol, heating oil, etc.

We start by looking at the different investment strategies that exist, the different ways to invest in oil.

An own well, or at least a share in a well or an oil field. There are a number of different companies that specialize in this area. Some only offer the option to buy a share of a lease, a so-called WI or working intrest, in an oil well. Others offer a comprehensive service, and also handle all paperwork and act as brokers.

Buy shares in oil companies. There are a number of different sound companies working to extract or prospect for oil whose shares are traded on stock exchanges around the world. Royal Dutch Shell plc (NYSE: RDS-A), Exxon Mobil Corporation (NYSE: XOM) and Lundin Energy (Stockholm: LUNE) are examples of companies in this sector.

Exchange traded funds. There are several very well-known exchange-traded funds that offer investors an opportunity to expose themselves to the oil price. There are also ETFs that do not invest in oil, but in oil companies. Investors can also buy or gloss over oil-related, exchange-traded funds. Two of the most traded oil-backed ETFs are USO and OIL. Other options are DCR, UCR and DUG. Anyone who wants leverage can get it too. The problem with exchange traded funds is that for a couple of years it has not been possible for European investors to buy US ETFs. On the other hand, CFD contracts can be traded on US exchange-traded funds.

Among the ETFs that invest in oil producing companies are SPDR Energy Select Sector Fund, SPDR S&P Oil and Gas Exploration and Production ETF, VanEck Vectors Oil Services ETF, iShares U.S. Energy ETF and Vanguard Energy Index Fund ETF.

In addition to ETFs, there are also so-called Mini Futures and certificates (ETNs) that are traded on the stock exchange. These are also a type of exchange-traded products, and are available both with and without leverage.

Futures or options. A common way to trade oil is to do it through futures or options on NYMEX, New York Mercantile Exchange. These are delivered every month all year round and are traded under the short name CL (refers to Light Sweet Crude Oil). The oil traded on NYMEX is priced in dollars. More than 10 million contracts are usually traded per month, which offers excellent liquidity. However, futures and options on oil have a relatively high risk because they are traded in units of 1,000 barrels and $ 0.01 per barrel minimum price change

CFDs. One of the easiest ways to trade oil is to do it with CFDs. A CFD (contract for difference) is a type of contract between a trader and a broker. Most CFD trading providers allow traders to speculate in the price of futures contracts for crude oil, but the contact sizes are often much smaller than regular futures contracts. For example, a CFD for crude oil may be for 25 barrels, instead of a standard contract of 1,000 barrels. You can also shop with soft ingredients in the same way, directly from home.

CFDs allow you to trade in crude oil in both directions. Whether you have a positive or negative view of the crude oil forecast and forecasts, you can try to profit from either the forward or downward price movement.

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