Question

Write-down the details of the petrolume prices realted with common references
or scale of crudes? Give particular prices for each references logically in petrolum
international market during Coronavirus pandemic?

Answer 1

Types of Oil and Pricing

One might assume there is only one type of oil, but that's far from the truth: There are 161 different types, each with its own consistency, chemical breakdown, and potential for use.

Even though there are so many forms of oil, we typically only cite only one price for a barrel. This is because oil traders have selected the most widely used types of oil to determine the price per barrel. For instance, one common type of oil found and used in America is called West Texas Intermediate (WTI). West Texas Intermediate's popularity is due to it being a "light and sweet" oil, which is easy to break down in the refining process. Since this oil is purchased quite frequently, it is used as an industry standard.

Other price benchmarks are used globally. Most European nations use the Brent Blend, found in the North Sea, as their benchmark price. Another heavily used benchmark is the OPEC basket, which combines the prices of several other popular types of oil from around the world into a "price basket."

And while oil can be purchased directly (in what is called the spot market), the commonly cited price per barrel does not reflect what a customer pays. Instead, the price bandied about has been sold on the futures market. In America, WTI crude-oil futures are traded through the New York Mercantile Exchange (NYMEX). European oil futures are sold through Intercontinental Exchange's London branch. Globex is another popular commodities market where oil futures change hands.

Oil and Gas Correlation

There is a limited positive correlation between crude oil and natural gas prices. It seems logical there would be a positive correlation between the commodities, especially since natural gas is often a byproduct of drilling for crude oil. While at times crude oil and natural gas have had a positive correlation, the markets for each commodity are substantially different and subject to different fundamental forces. Statistical analysis shows there are periods of positive correlation, but generally, the two have limited correlation.

Natural Gas & Oil Correlation

The correlation coefficient is a statistical measure of the extent to which the price of natural gas and crude oil move together. It is also a measure of the degree to which the prices move together. The correlation coefficient is measured on a scale of -1 to +1. A measure of +1 indicates a perfect positive correlation between two asset prices, meaning the prices of the assets move together in the same direction to the same degree proportionally all of the time.

A measure of -1 indicates a perfect negative correlation. This means the asset prices move in the opposite direction of each other in the same proportion all of the time. If the correlation coefficient is zero, it means there is no relationship between the two prices. The correlation coefficient is often used in the construction of portfolios by providing a statistical measure of the diversification of the assets in the portfolio.

Oil and Gas Data Sources

The Energy Information Administration (EIA) provides historical data for the daily correlation between commodities on a quarterly basis. This information indicates the correlation between crude oil and natural gas is falling. For example, in 2004, the average quarterly correlation between the two prices was around 0.45.16 This is a moderate positive correlation.

In 2010, this correlation average fell to -0.006, showing there was very little relationship between the prices. In 2014, the average correlation was 0.075. This also indicates very little correlation. However, the first two quarters of 2015 show an average correlation of 0.195, which is slightly positive. Prices for both commodities generally fell during this period.16

The highest correlation was in the third quarter of 2005 with a measure of 0.699. The lowest correlation was in the third quarter of 2010 with a negative correlation of -0.21. In general, the correlation is falling. The EIA notes this is due to the increase in shale oil natural gas production.

Gas Production and Oil

Natural gas oil production has increased dramatically with the discovery of new shale drilling technologies. Between 2007 and 2012, natural gas production from shale drilling rose by a whopping 417% and overall production increased by around 20% during the same period. Natural gas prices have shown greater volatility historically than crude oil prices, while low natural gas prices have led sectors such as the transportation industry to use more natural gas over crude oil.

Prices and Oil Production

Shale drilling technologies have also led to expanded crude oil production. Daily crude oil production increased from 5.35 million barrels per day in 2009 to 6.5 million barrels in 2012. Production in 2014 grew even more to 8.7 million barrels a day. Estimates for 2015 indicate this number will likely grow even larger.

This increased production is one of the reasons for the dramatic drop in oil prices from 2014 to 2015. Oil was trading at over $105 a barrel in June of 2014 and by late January 2015, the price cratered to around $45 a barrel. Supply was outstripping demand and increased production combined with lower demand has hurt prices. Further, economic uncertainty across the globe has called into question the strength of future demand.

2.

Oil prices slid daily, extending heavy overnight losses on a surge in US coronavirus cases this week that has raised the prospect of a second wave of the outbreak slamming demand in the world's biggest consumer of crude and fuel.

West Texas Intermediate was down $1.32, or nearly 4%, at $35.02 a barrel by 0011 GMT, after slumping more than 8% on July 2020. Brent crude was down $1.15, or 3%, at $37.40 a barrel, having dropped nearly 8% the previous session.

A rally off April's lows has come to a shuddering halt this week as the market faced the reality that the coronavirus pandemic may be far from over globally, with cases in the United States alone passing 2 million this week.

Brent is heading for its first weekly decline in seven, dropping about 12%, while US crude is heading for a loss of around 4% in its second consecutive weekly drop.

A sustainable rally needs to include improving gasoline demand, reducing inventories, increasing product margins to the point where refiners kickstart runs.

While producers have been cutting supply, demand remains constrained by the outbreak, with gasoline stockpiles in the US last week rising more than expected to 258.6 million barrels, according to government data.

US crude inventories rose against forecasts by 5.7 million barrels to a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country.