Great Opportunity In Trading Oil
This article looks at global oil trade and transportation. It is well known fact that the main oil producing areas may not be the main consuming areas. Hence, oil has to be transported to the regions of demand.
Traditionally, oil trading was a place where only the leading and privileged traders dared to venture. With a contract of minimum 1,000 barrels and each barrel holding 42 gallons, the task of oil trading was best left to the professionals. However, over the years, the scene of trading oil and has undergone some interesting changes.
Global oil trading results in oil flows from one country to another and even from one region within a country to another. These oil flows, dictated by temporary imbalances in supply and demand, are important to the efficient operation of the oil market. The world’s biggest importers are North America, Europe and Asia-Pacific. The Middle East still exports maximum oil than any other region.
Oil trading holds the maximum volume in international trade than in anything else. Whether measured by volume or value, this fact remains true. Different measures of trading are import for different reasons. Volume of trade provides insights on over- or under-supplied markets. Governments and economists assess patterns of international trade and payments on the basis of value of trade.
Transportation and storage play an important additional role here in world oil trading. Along with being a strong physical link between the importers and the exporters, they form an important connection between producers, refiners, marketers and consumers. Their associated costs are a key factor in determining the pattern of oil trade.
Distance becomes the main factor in deciding the first choice of the market. As the supplier will look for highest value, oil moves to the nearest market first because of lowest transportation cost. Progressively, the supplier will move on to the next market incurring progressively higher transportation costs, until all the oil is traded. A good example for this is the Western Hemisphere sources supplying over half the United States import volume.Sometimes, the oil trade flows do not always follow the basic "nearest first"
pattern. Refinery configurations, product demand mix, product quality specifications –- all three of which tie into quality -- and politics can change the trading. In addition, both buyers and sellers may enforce restrictions.
The two chief modes of transportation for inter-regional oil trade are: tankers and pipelines. Tankers are low cost, efficient, and extremely flexible, thus promoting intercontinental trading of oil possible. Pipelines, on the other hand, are the preferred choice for transcontinental oil movements and are critical for landlocked crude. Sometimes they also assist tankers by relieving bottlenecks or providing shortcuts at certain locations.
With the demand of oil on a continuous upward swing and the oil production declining, not many new sources are expected to be realized throughout the globe. Technology has no other option but to lean in the direction of developing new forms of energy. Moreover, any of these new sources will not appear on the market for at least a period of ten years.
However, the new forms of global oil trading mechanisms evolving are allowing the average investor to take part in a market that was considered exclusive at one time.
Today, a skilled manager makes more than the owner. And owners fight each other to get the skilled managers.
— Mikhail Khodorkovsky.