Intro(related to crude oil)

Crude Oil Definition: A mixture of hydrocarbons that exists in liquid phase in natural
underground reservoirs and remains liquid at atmospheric pressure after passing through surface
separating facilities. Depending upon the characteristics of the crude stream, it may also include
1. Small amounts of hydrocarbons that exist in gaseous phase in natural underground reservoirs
but are liquid at atmospheric pressure after being recovered from oil well (casing head) gas in
lease separators and are subsequently comingled with the crude stream without being separately
measured. Lease condensate recovered as a liquid from natural gas wells in lease or field
separation facilities and later mixed into the crude stream is also included; 2. Small amounts of
nonhydrocarbons produced with the oil, such as sulfur and various metals; 3. Drip gases, and
liquid hydrocarbons produced from tar sands, oil sands, gilsonite, and oil shale. Liquids
produced at natural gas processing plants are excluded. Crude oil is refined to produce a wide
array of petroleum products, including heating oils; gasoline, diesel and jet fuels; lubricants;
asphalt; ethane, propane, and butane; and many other products used for their energy or chemical
content.

Currently, India's consumption (111.9 MMT in 2005-06) of petroleum products is only about
1/5th of world's average per capita consumption. In the X Plan (2002-07), the growth in
consumption is expected to be around 2.6 percent per annum. In India, the indigenous production
of crude oil has not been increasing in tandem with the consumption/demand of petroleum
products. Government of India, under the NELP program, has already given a number of blocks
for exploration, to various national and international agencies.
The crude oil and gas reserves as on April 1, 2006 stand at 756 MMTOE and 1,075 BCM
respectively. In 2005-06, crude oil and natural gas production by ONGC, OIL and Pvt/JV
companies was about 32.19 MMT and about 32.20 BCM respectively. Several experts have
forecast an era of high oil prices to continue. With the country's high oil import dependence, it is
necessary that petroleum products be priced in a consistent manner under a long-term policy. It is
also essential that economic pricing is blended with social responsibility so that the oil sector
continues to function and service the oil needs of the economy.

According to Ministry of Petroleum and Natural Gas, India has a total recoverable crude oil
reserve of 757.4 million metric tonnes (mmt) as on March 31, 2012. This implies a reserve life of
just 20 years taking FY12 crude oil production of 38.1 mmt. India has 0.3 per cent of oil and gas
resources of the world and 18 per cent of the worlds population. Indias crude oil consumption
has grown at a CAGR of 4.3 per cent for the last 10 years driven primarily by the transportation
sector. As crude oil supply has been largely stagnant, Indian crude oil industry continues to
remain highly import dependent with imports constituting about 74 per cent of demand in FY
2012. Indias oil demand is expected to grow at a steady rate of 4.6 per cent over FY 2014-16.
However, crude oil production is not expected to keep pace with rising demand (expected to
grow at 4.3 per cent over the same period). Thus, India is expected to continue to rely on
imported crude for more than 75 per cent of its needs in near term.The report on the Indian
Crude Oil Industry gives valuable insights intobasics of the industry, infrastructure, regulations,
oil pricing, current global and domestic crude oil market scenario etc. The report also provides
CARE Researchs outlook and insight into future trends in the industry with respect to key
demand-supply metrics, international oil price trend, supply outlook from key domestic fields in
India. For this analysis, CARE Research has indigenously developed its Oil Intensity Model to
forecast global oil demand over the next three years. The model involves CARE Researchs
quantitative and qualitative judgment on oil intensities of over 70 countries and has utilized GDP
forecast by the International Monetary Fund (IMF). On the supply side, CAREResearch has used
a combination of the decline rate methodology and its Oil Fields Database comprising over 230
new fields that are expected to come on-stream in the next three years.The report is indispensable
for any company in the oil industry, banks/ FIs, policy makers, research and academic
organizations, other international and national agencies etc. Additionally, the four quarterly
updates, from the date of subscription, alongwith this report would form a potent tool for the
subscribers to keep abreast of the happenings in the industry.
The Importance of Demand Forecasting
Forecasting product demand is crucial to any supplier, manufacturer, or retailer. Forecasts
of future demand will determine the quantities that should be purchased, produced, and shipped.
Demand forecasts are necessary since the basic operations process, moving from the suppliers'
raw materials to finished goods in the customers' hands, takes time. Most firms cannot simply
wait for demand to emerge and then react to it. Instead, they must anticipate and plan for future
demand so that they can react immediately to customer orders as they occur. In other words,
most manufacturers "make to stock" rather than "make to order" they plan ahead and then
deploy inventories of finished goods into field locations. Thus, once a customer order
materializes, it can be fulfilled immediately since most customers are not willing to wait the
time it would take to actually process their order throughout the supply chain and make the
product based on their order. An order cycle could take weeks or months to go back through part
suppliers and sub-assemblers, through manufacture of the product, and through to the eventual
shipment of the order to the customer.
Firms that offer rapid delivery to their customers will tend to force all competitors in the

market to keep finished good inventories in order to provide fast order cycle times. As a result,
virtually every organization involved needs to manufacture or at least order parts based on a
forecast of future demand. The ability to accurately forecast demand also affords the firm
opportunities to control costs through leveling its production quantities, rationalizing its
transportation, and generally planning for efficient logistics operations.

In general practice, accurate demand forecasts lead to efficient operations and high levels of
customer service, while inaccurate forecasts will inevitably lead to inefficient, high cost
operations and/or poor levels of customer service. In many supply chains, the most important
action we can take to improve the efficiency and effectiveness of the logistics process is to
improve the quality of the demand forecasts.
The Nature of Customer Demand
Most of the procedures in this chapter are intended to deal with the situation where the
demand to be forecasted arises from the actions of the firms customer base. Customers are
assumed to be able to order what, where, and when they desire. The firm may be able to
influence the amount and timing of customer demand by altering the traditional "marketing mix"
variables of product design, pricing, promotion, and distribution. On the other hand, customers
remain free agents who react to a complex, competitive marketplace by ordering in ways that are
often difficult to understand or predict. The firms lack of prior knowledge about how the
customers will order is the heart of the forecasting problem it makes the actual demand
random.

However, in many other situations where inbound flows of raw materials and component parts
must be predicted and controlled, these flows are not rooted in the individual decisions of many
customers, but rather are based on a production schedule. Thus, if TDY Inc. decides to
manufacture 1,000 units of a certain model of personal computer during the second week of
October, the parts requirements for each unit are known. Given each part suppliers lead-time
requirements, the total parts requirement can be determined through a structured analysis of the
product's design and manufacturing process. Forecasts of customer demand for the product are
not relevant to this analysis. TDY, Inc., may or may not actually sell the 1,000 computers, but
that is a different issue altogether.

Once they have committed to produce 1,000 units, the inbound logistics system must work
towards this production target. The Material Requirements Planning (MRP) technique is often
used to handle this kind of demand. This demand for component parts is described as dependent
demand (because it is dependent on the production requirement), as contrasted with independent
demand, which would arise directly from customer orders or purchases of the finished goods.
The MRP technique creates a deterministic demand schedule for component parts, which the
material manager or the inbound logistics manager must meet. Typically a detailed MRP process

is conducted only for the major components (in this case, motherboards, drives, keyboards,
monitors, and so forth). The demand for other parts, such as connectors and memory chips,
which are used in many different product lines, is often simply estimated and ordered by using
statistical forecasting methods such as those described in this chapter.
Sales History versus Demand Data
Most firms believe that they have an extensive historical demand database to use for
forecasting, but in fact this is very seldom the case. In most firms, all of these records actually
represent sales histories, not demand histories. If the firm enjoys one hundred percent inventory
availability, one hundred percent of the time, then this is probably not of great importance. But to
the extent that individual items are out of stock, and sales are lost as a result, sales data will
generally misrepresent the "true" or "latent" demand that occurred. In many firms, particularly at
the retail level, there is no effective way to capture this "missing" demand. In a retail
establishment, a customer looks at the shelf, sees the out of stock condition, and buys the item
from someone else. Even in the commercial or industrial setting, where it would be possible to
capture "lost demand data" in the formal order processing system, very few firms do. As firms
move towards increased Supply Chain visibility by allowing their customers one-line, real-time
access to their current inventory availability position, more and more commercial and industrial
ordering situations begin to resemble the consumer retail shelf in this regard.
As a result, our carefully maintained data may be accurate sales records, but they are not
demand data. For purposes of forecasting future demand, we should augment the sales records with
estimates of "lost demand", but this is not easy to do. The fundamental question can be thought of as
this: How much would we have sold while we were out of stock? Unfortunately, in most cases this is
simply "unknowable". On the other hand, if we ignore the issue, then we are implicitly estimating the
missing data with a value of zero. Surely we can do better than that.
Suppose, for example, that the record shows that we sold 300 units of an item last month.
Suppose the records also show that the item was out of stock for a total of one week last month.
If we simply (and conservatively) assume that demand is about the same each day, and that it is
not affected by our stock position, then it seems reasonable to estimate that "true demand" was
about 400 units. In other words, a very rough way to approximate true demand in a period might
be:

As simple as this adjustment is, most firms do not use it. There seems to be great reluctance to
use "imaginary" data, as opposed to the "real" data in the sales records. The point is, which set of
numbers will do the best job of forecasting future demand -- total demand -- for the item? Notice,
also, the self-perpetuating nature of this process. We run out of stock in one period and lose some
potential sales as a result. Using this sales record, we under-forecast demand in the next period.
Based on this low forecast, we carry too little inventory in the next period. As a result, we run out
again, and the vicious cycle continues. Eventually, customers tire of our poor inventory
availability and they don't come back. At this point our under-forecasts have become a selffulfilling prophecy. There is no easy analytic solution to this problem. However, it seems clear

that for items that have serious availability problems, some adjustment to sales data must be
made to correct the biased forecasts that will otherwise inevitably occur.
Objectives
1.
2.
3.
4.
5.
6.

w Increased CrudeOilDemand IndiaAffectsthe International Market

production by the opec countries and wti
To analyze the basic concept of demand of crude oil in Indian Economy.
To find the drawbacks in India.
To forecast about crude oil
Since crude oil market is highly volatile, the estimation of the time series model must be
able to detect its volatility.

Analysis and Recommendations:

Crude Oil is trading at 110.15 ahead of todays inventory release, which probably will have little
effect on prices. Crude oil prices jumped nearly 5 percent to an 18-month high capping an
increase of about 24 percent over the past two months as a result of scattered supply disruptions
and rising anxiety about war and political instability in the Middle East. The growing likelihood
of a U.S.-led military response to reports of Syrian use of chemical weapons rattled markets,
analysts said. The price of the U.S. benchmark crude oil, West Texas Intermediate, on the New
York Mercantile Exchange closed at $109.01 a barrel yesterday, up $3.09 from the day before
and up from less than $95 in late June.
Syria, whose oil output is down to fewer than 50,000 barrels a day from 350,000 in March, is
insignificant in the 90 billion-barrel-a-day global oil market. Although it once exported about
150,000 barrels a day, Syria has been barred from selling oil internationally since sanctions took
effect in 2011. But Syrias conflict threatens to spread. It has pitted Saudi Arabian-backed Sunni
rebels against the Iranian-backed Shiite regime of President Bashar al-Assad, an unusually open
conflict between proxies of the two leading Persian Gulf powers. Syrias civil war is also
inflaming strife in Iraq, where violence has reached the highest level in five years. Sunni
insurgents have repeatedly bombed and disrupted export pipelines from Kirkuk to the Turkish
port of Ceyhan, putting a dent in the output of OPECs second-largest oil producer. The UN will
listen to condemnations and measures introduced by the UK later in todays session.
One factor driving up the price of the West Texas Intermediate benchmark has been the addition
or reversal of pipelines to alleviate the bottleneck in Cushing, Okla., where the price is set. Oil
flowing to Cushing from Canada, North Dakota and other areas can now be transported more
easily to the Gulf Coast, where there are more buyers.
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental
analysis is provided in three components. We provide a detailed monthly analysis and forecast at

the beginning of each month. Then we provide more up to the data analysis and information in
our weekly reports.

Changes of world crude oil price have always been in the focus of economic and financial news.
The higher crude oil prices are, the more positive is the economic outlook for petroleum
exporters. On the contrary, countries dependent on petroleum imports suffer from high energy
prices.
In Jule 2013 The World Bank released its Commodity Forecast, which predicts that world crude
oil price will decrease from $105/barr. in 2012 to $96/barr. in 2013 and to $100/barr. by 2020.

According to Commodity Price Forecast from IMF, spot average price fore crude oil will drop to
$87.9/barr. by 2018

Conclusion

References

http://www.fxempire.com/fundamental/fundamental-analysis-reports/crude-oilfundamental-analysis-august-29-2013-forecast/

http://www.forecasts.org/oil.htm

http://knoema.com/yxptpab/crude-oil-prices-long-term-forecast-to-2025-data-andcharts

http://eprints.utm.my/12354/4/LeeCheeNianMFS2009CHAP1.pdf
http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca.energy/files/pdf/eneene/pdf/pcopdp
-eng.pdf
http://www.moneycontrol.com/commodity/crudeoil-price.html
http://www.careratings.com/Portals/0/ResearchReports/BrochureIndianCrudeOilI
ndustry.pdf
http://www.indexmundi.com/energy.aspx?
country=in&product=oil&graph=consumption