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CRUDE OIL WTI

Factors effecting supply of crude oil


1. American Shale- As at the end of 2014, the United States was producing more than 9
million barrels of oil per day, an 80 percent increase from beginning of 2007. That surplus
output went a long way to create a glut of oil, which sent oil prices to the dumps in 2014.

2. Elasticity of demand- In some countries where oil prices are more regulated, low prices
may not trickle down to the retail level. Countries like Indonesia are scrapping subsidies,
which will be a boon to state coffers but will diminish the benefits to consumers. However,
in the United States, gasoline prices are now below $2.40 per gallon, more than 35 percent
down from mid-2014. That has led to an uptick in gasoline consumption. In the waning
days of 2014, the U.S. consumed gasoline at the highest daily rate since 2007. Low prices
could spark higher demand, which in turn could send oil prices back up.

3. OPECS next move- OPECs decision to control the supply of crude oil in the global
markets also plays a deciding role in the crude oil prices

ICE BRENT

Approximately two-thirds of the worlds traded crude oil uses the Brent complex, which includes
ICE Brent futures with its deep liquidity and far-reaching forward curve, as a price benchmark.
Many national oil producers and other participants around the world price crude at a differential
to Brent, depending on the crude grade. Factors such as Brents accessibility and reach as a
seaborne crude, production, adaptation to changing global economics in the oil market, stability
and geographic location have consolidated Brents global benchmark position and contributed to
physical participants, such as international airlines and oil producers in Asia, adopting Brent as a
primary hedging tool.

After falling to multi-year lows earlier in the year, crude oil prices stabilized in April 2015,
remaining at around the $60/b range until June. However, in July, a set of bearish factors pushed
crude oil prices to their lowest levels in months, with Nymex WTI nearing $45/b and ICE Brent
around $50/b. This decline in oil prices came amid a sell-off in crude futures, triggered largely by
continued oversupply at a time when incremental global demand has not followed suit . Recently,
Brent has settled in the proximity of 50
RBOB Gasoline

The terms petrol or gasoline refer to Reformulated Gasoline Blend stock for Oxygen Blending
(RBOB), which is simply the term given to unleaded gas futures. For every three barrels of crude
oil refined, approximately two barrels of gasoline can be salvaged. Refining this essential fuel can
be done in a variety of ways, with the most popular being forms of cracking. RBOB Gasoline
futures are traded on the Chicago Mercantile Exchange, with prices quoted in U.S. dollars and
cents per gallon under the symbol RB. A single contract represents 42,000 gallons with a minimum
fluctuation of $0.0001 per gallon. Listed contracts conduct trading throughout the next 36
consecutive months. All contracts are subject to the rules and regulations of NYMEX.

The major price drivers of gasoline include:

Crude Prices: Gasoline is a natural by-product of crude and is therefore directly tied to the
prevailing price of crude. Any swing in the price per barrel of oil will translate into higher prices
at the pump.

Geopolitical Concerns: Most of the oil comes from emerging markets or other nations around the
world. This means that political ties to other countries is a key factor in the prices of gasoline, and
any global tension can cause a rift in those prices.
U.S. Trends: Gasoline is one of the few commodities heavily dominated by U.S. demand. Any
trends in the United States economy, such as public transit improvements or failures, could lead to
major swings in gasoline prices as consumers shift towards, or away, from widespread gasoline
use.

RBOB has fallen from 244$ in 2011 and settled close to 150$ recently.

Heating Oil

Heating oil is a petroleum product refined from crude oil. At refineries, crude oil is processed into
different kinds of fuel, including gasoline, heating oil, diesel fuel, jet fuel, kerosene, and
lubricating oil. Many Americans, especially in the Northeast, use heating oil for space heating and
water heating.

Heating oil and diesel fuel are closely related products called distillates.

Heating oil prices fluctuate for a variety of reasons:

Heating oil demand is seasonalWhen crude oil prices are stable, home heating oil prices tend
to rise in the winter months when demand for heating oil is highest.
The cost of crude oil changesThe cost of crude oil is a major component of price of heating
oil. Worldwide supply and demand determines the prices for crude oil. Demand will vary
depending on factors such as the economy and the weather. Weather events in the United States
and political events in other countries can affect supply
Competition in local markets variesThe number of heating oil suppliers a region has can affect
the level of price competition in that area. Heating oil prices and service offerings can vary
substantially in places with few suppliers compared with areas that have a large number of
competing suppliers. Consumers in rural locations that have fewer competitors may pay higher
prices for heating oil.
Regional operating costs can varyThe cost of delivering heating oil to remote locations can
also affect heating oil prices. The cost of doing business can vary substantially depending on the
area of the country where the dealer is located.

Heating oil has slipped from 254$ to vicinity of 140$ in June 2017.