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TEJ Dictionary

【TEJ Dictionary】Crude Oil

Can’t live without oil

🔸Introduction🔸

The fast-spreading Omicron virus has not caused most countries to resume lockdowns, and the negative impact on economic activities is not as severe as expected. Short-term demand has increased. The supply-side Libyan militias blocked oil fields, the Yemen Houthis attacked the UAE oil pipeline, and the Ukrainian-Russian relationship was tense. Geopolitical risks have made oil prices continue to rise this year. In January, the prices of Brent and WTI crude oil futures broke through the highs of October last year, the highest since 2014, approaching $90/barrel; in February Putin officially announced his attack on Ukraine, The price increase increased, and the price of Brent crude oil futures exceeded the 130 mark.

Crude oil is an important indicator of cost. In addition to directly affecting transportation costs, the prices of raw materials for industrial production and agricultural fertilizers are deeply affected by crude oil prices from upstream to downstream industries. An increase in crude oil prices may force companies to increase the cost of goods and even labor. It is very important to understand the impact of changes in crude oil prices on the industry when asking for higher wages.

The price of crude oil has previously soared due to factors such as the epidemic and the supply chain. Recently, due to the global pessimism about the situation in Russia and Ukraine, the price of crude oil has surged to more than 90 yuan (USD, about NT$2,510) per barrel, a new high since 2014. For the record, energy experts warned that if the war broke out in full swing, the price would definitely exceed 100 yuan (US dollar, about NT$2,788) a barrel.(udnnews)

Highlights of this article

1. Introduction to the world’s three major crude oil benchmarks

2. Crude Oil Futures

3. How to Find the Crude Oil Prices Database

  1. Introduction to the world’s three major crude oil benchmarks

Crude oil is the most important commodity in the world, and it is an important raw material for the petrochemical industry and textile industry. To be able to serve as a world benchmark crude oil must meet three conditions: stable and abundant crude oil production, transparent and free fluctuations in the trading market. Different metals such as other metals belong to consumable energy. About 80% of the world’s crude oil is used for fuel oil, and 20% is the production and sufficient inventory to ensure the trading market. The following three kinds of crude oil meet three conditions, which have important reference significance for pricing.

📍Brent
The benchmark for crude oil in Europe, Africa and the Middle East, produced in the North Sea Oilfield in the northeast of the United Kingdom, is the most widely used benchmark crude oil in the global crude oil market, accounting for more than 50% of the world’s crude oil trading volume. Sulfur content 0.37%), it is mainly used to refine gasoline, diesel oil, and jet fuel. Due to its wide trade and availability, it can be used as an indicator reflecting global supply and demand.
In 1988, it was listed on the International Petroleum Exchange in London, England. The futures contract does not have a delivery place, and the physical delivery is carried out by converting the futures to the spot.

📍WTI
The benchmark for crude oil in the Western Hemisphere, produced in the western region of Texas, USA, is a light, low-sulfur crude oil (0.24% sulfur content) with high quality, which can be refined into a higher proportion of gasoline, mainly used to refine daily gasoline. and fuel oil, which can be used as indicators to reflect the supply and demand in the United States.
Listed on the New York Mercantile Exchange in 1983, it is currently the commodity with the largest trading volume in the global commodity futures.

📍Dubai/Oman
Produced in the Arab region, it is a medium-quality high-sulfur crude oil (with a sulfur content of about 2%), and its quality is the worst among the three major crude oils. It is the main pricing benchmark for sour crude oil and has a greater impact on Asian oil prices. % Dubai crude oil and 30% Brent crude oil.
Dubai crude oil does not have a futures market, and is traded through Platts’ spot trading platform; Oman crude oil is listed on the Dubai Mercantile Exchange (DME) in the United Arab Emirates as the subject of futures contracts, but due to its contract design, it only has the form of futures trading. In fact, it belongs to the same spot transaction as Dubai crude oil.

2. Crude oil futures
Crude oil, which is used as a variety of industrial products and petrochemical raw materials, is not easy to regenerate due to its slow formation rate, and its production rate is not as fast as its consumption rate, which makes crude oil have the characteristics of long-term high value. In order to avoid the losses of buyers and sellers, crude oil futures were born in response to hedging needs. In addition to being used to lock future crude oil prices, they have also become investment commodities of public concern.
The Taiwan Futures Exchange currently has “Brent crude oil futures”, which were launched by the Futures Exchange after obtaining the authorization of the ICE Brent index. The Taiwan version of Brent crude oil futures is priced in NT dollars. At USD 100 per barrel and the exchange rate of NTD to USD 30, each contract is worth about NTD 600,000.
As mentioned above, the price of crude oil is affected by many factors. The following are some important indicators for reference

📍War & Politics
Factors such as war, embargo, production increase and production reduction will all affect the price of crude oil. In the past, the oil crisis caused by the Arab war, the Iran-Iraq war, the Iraqi invasion of Kuwait and the 9/11 incident have all caused sharp fluctuations in oil prices. Observe the Geopolitical Risk Index (GPR) compiled by Fed economists Dario Caldara and Matteo lacoviello to understand related political, war risks

📍Supply and demand
The Organization of Petroleum Exporting Countries (OPEC) is responsible for coordinating and managing oil policies and prices to ensure oil supply. Changes in crude oil supply, demand and inventories can be inquired on the official website of OPEC, the International Energy Agency (IEA), and the U.S. Energy Information Administration (EIA). and other related information

(Source:OPEC Market Indicators)

📍USD
Crude oil is denominated in US dollars. The strength of the US dollar determines the attractiveness of crude oil futures to foreign investors. Generally speaking, a depreciation of the US dollar will make the commodity more attractive, resulting in an increase in the price of crude oil denominated in US dollars.

📍Other factors
Abnormal climate, short-term flow of international funds, relevant tax policies of major countries, etc.

3. How to Find the Crude Oil Prices Database

The “Commodity Raw Materials (Week/Month)” database started in 1986. The main items are the indicative prices of commodities, mostly wholesale prices (or ex-factory prices), export quotations and import quotations provided by major manufacturers of bulk commodities. Since commodity transactions are not centralized quotations, the data must be collected, inspected and verified by multiple parties. Therefore, TEJ first collects commodity market quotations and commodity price adjustment news regularly released by domestic and foreign media or institutions, and then sorts, filters and aggregates various data sources. Weekly and monthly reports of derivatives prices. The operation flow of the database is provided below. Readers can follow the steps below:

📍 “Crude Oil Price” database operation process

1️⃣ “Crude Oil Price” database location
👉Click TEJ➡️ TEJ Profile ➡️ Commodity (Week)

2️⃣ Click on the index above ➡️ select “Brent crude oil spot price (USD/barrel)”

3️⃣Date setting

The database has daily prices for users to refer to. In addition, they can also select a stock and select a specific range through the 🗓 calendar icon in the upper right corner to complete the data creation and query. If you want to query all the data, you can click the data first. Start and end➡️ Then enter the date in the upper right corner, the following picture takes Brent crude oil as an example: Enter 19860101–99999 to query all historical data

4️⃣Data description

TEJ also provides information on the raw materials of individual commodities. You can click on the list on the right “Commodity Raw Materials Description”, and output the raw material label in the upper index. For example, the North Sea Brent crude oil code is “13ZL02”, you can see the relevant information.

5️⃣Example: If the reader is also a TEJ user, you can also grab it through the database of commodity raw materials! The following are the corresponding codes of the three major benchmark crude oils in the TEJ database, and the date setting range is Jan 1,2017~Mar 11,2021, unit (USD/barrel)

🔸Conclusion 🔸

Oil is closely related to our lives. This article introduces benchmark crude oil and crude oil futures to give readers a preliminary understanding of the relevant knowledge. We can use the “Commodity Raw Materials” database to find crude oil price changes, or other raw material prices that we want to pay attention to. Can quickly find the information you need.

If you have any further queries or suggestions regarding the TEJ database, please do not hesitate to send your inquiries or ideas by phone or by email to us.

☎️: 02–87681088

✉️: tej@tej.com.tw

🔸Related link🔸

⭐️TEJ official website

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TEJ 台灣經濟新報

TEJ 台灣經濟新報

TEJ 為台灣本土第一大財金資訊公司,成立於 1990 年,專門提供金融市場基本分析所需資訊,以及信用風險、法遵科技、資產評價、量化分析及 ESG 等解決方案及顧問服務。鑒於財務金融領域日趨多元與複雜,TEJ 結合實務與學術界的精英人才,致力於開發機器學習ML、人工智慧AI及自然語言處理NLP等新技術,持續提供創新服務