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Guide to Commodities
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Crude Oil
Data source: U.S. Energy Information Administration, Petroleum Supply Monthly, March 2023, preliminary data
Note: A 42-gallon (U.S.) barrel of crude oil yields about 45 gallons of petroleum products because of refinery processing gain. The sum of the products amounts in the image may not equal 45 because of independent rounding.
What petroleum products are made from crude oil?
After crude oil is removed from the ground, it is sent to a refinery where different parts of the crude oil are separated into useable petroleum products. A U.S. 42-gallon barrel of crude oil yields about 45 gallons of petroleum products.
The number of individual products produced varies from month-to-month and year-to-year as refineries adjust production to meet market demand and to maximize profitability.
Data source: U.S. Energy Information Administration, Petroleum Supply Monthly, March 2023, preliminary data
Note: A 42-gallon (U.S.) barrel of crude oil yields about 45 gallons of petroleum products because of refinery processing gain. The sum of the products amounts in the image may not equal 45 because of independent rounding.
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WTI Crude Oil ETC
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Brent Crude Oil ETC
Overview
Crude oil is one of the most important energy sources used globally. Due to the importance of this energy source, a vast market for physical trading, as well as derivatives trading exists.
Globally, crude oil is one of the most important fuel sources and, historically, has contributed to over a third of the world’s energy consumption. Discovering, extracting, shipping, and refining crude is a long process, and the infrastructure needed to support the process must be in place. This involves thousands of miles of oil pipelines across countries, storage facilities in major oil trading hubs, and multiple refineries.
In aggregate, the global oil industry is a multi-trillion-dollar industry.
Oil is especially important to businesses that heavily rely on fuel, such as airlines, plastic producers, and agricultural businesses. Being such an important source of energy, crude is a major import and export of numerous countries. The importance of this commodity creates a vast financial trading market for oil and oil derivatives such as futures, forwards, options, ETFs, ETPs, and CFDs.
10.0°
22.3°
33.1°
Extra Heavy
Heavy
Medium
Light
Classification by API Gravity
The quality of oil from various locations varies because it forms differently due to their geographical makeup. It exists in a multitude of forms, and its composition will determine how it is transported and refined.
Generally crude is classified by using both its physical and chemical characteristics. Based on density, oil is classified as light, medium, heavy, or extra heavy. Based on sulphur content, is divided into a sour and sweet category.
Crude oil is referred to as either light, medium, or heavy, based on its density. The American Petroleum Institute (API) gravity compares the density of crude to water. An API gravity higher than 10 means the oil is less dense than water and will float on it. An API gravity lower than 10 means the oil is denser than water and will sink in it.
0.5%
Sour
Sweet
Classification by Sulfur Content
Crude oil can also be referred to as sour or sweet, based on the sulphur content of the unrefined oil. Determining the sulphur content in crude oil is an important assessment of quality. Sulphur must be removed when refining crude. If it is not, when released into the atmosphere, it can cause pollution and acid rain.
Furthermore, high sulphur content can lead to the degradation of metals used in the refining process. When working with crude that contains hydrogen sulphide, it can also be dangerous because it poses a breathing hazard. Crude oil with a sulphur content greater than 0.5% is considered sour; less than 0.5% is sweet.
The figures above show the classifications for crude oil by API gravity and sulphur content.
Crude oil prices depend heavily on the two aforementioned classifications. Light crude is easier to refine and produces higher quantities of high-quality gasoline and diesel fuel. It also flows freely at room temperature. The heavier and denser the oil is, the harder it is to transport. Crude classified as extra heavy can also be referred to as bitumen. It is so thick that it must be diluted to transport.
Sulphur content is also very important in determining the quality, and thus the price, of crude. As noted, sulphur must be removed during the refining process. High quantities of sulphur also create problems related to transporting and working with the crude. For these reasons, sweet crude is generally priced higher relative to sour oil.
In general, light, sweet crude oil is the most desirable. And these two qualities make up the benchmark for premium oils.
However, there is one other very important factor that affects the price of crude – the location of extraction. If crude is extracted near the coast, it is much easier to transport globally. When it is extracted further inland, it must be transported via pipeline systems to refineries and, eventually, to the coast if it is to be transported globally.
When determining the price of crude oil, oil benchmarks are used as a pricing tool. There are various benchmark prices that correspond to specific oils, each with a distinct density and API gravity. The most commonly used benchmarks are West Texas Intermediate oil and Brent. Having an accessible price that corresponds to a specific geographical location, density, and gravity allows comparison and determination of the prices of different crude oils.
Two of the most popular oil benchmarks in the world are “Brent Crude” and “West Texas Intermediate” (WTI). Brent Crude oil is a blend drilled from below the North Sea and is one of the benchmarks for oil in the Middle East, Europe and Africa. Given the wider market wherein roughly two-thirds of the world’s oil is priced off Brent Crude futures, it is considered a global benchmark. WTI is a blend of several oils drilled and processed in the United States, thus, becoming a benchmark for the US oil market.
Since Brent is extracted at sea, large volumes of oil can quickly be transported in underwater pipelines. On the other hand, given that WTI reserves are primarily found inland, there are certain additional costs that could be factors in the final cost of the oil produced. However, US oil reserves are primarily extracted via new extraction technologies – such as well stimulation techniques and horizontal drilling – that are generally considered to be more effective. Due to the efficient usage of technology, WTI has become cheaper than Brent Crude. Historically, this tended to be the other way around.
wti
- Extracted from oil fields in the USA
- Primarily extracted in Louisiana, North Dakota and Texas
- Considered VERY light and VERY sweet
- API gravity ≈ 39.6°
- Sulfur Content ≈ .24%
- Landlocked – transportation onerous
brent
- Extracted from oil in North Sea
- Extracted from Brent, Forties, Osberg and Ekofisk oil fields
- Considered light and sweet
- API gravity ≈ 38°
- Sulfur Content ≈ .40%
- Waterborne – better for transportation
Given that not all crude oils are priced equally, the difference between the spot price of Brent Crude and WTI is often an area of interest to professional investors. This difference is referred to as the Brent/WTI Spread.
Global macroeconomics, along with supply and demand considerations, also affects the price of oil. For instance, a series of price actions undertaken between Saudi Arabia and Russia led to an event known as the OPEC Crash in 2020 wherein both the price of Brent Crude and WTI plummeted (with WTI significantly more affected).
On the heels of this was the COVID-19 pandemic and various movement restrictions enacted, which created an unprecedented “demand shock”: oil storage facilities were stocked full, and tankers lay berthed with full cargoes all over the world (sometimes for days) while production by major oil producers remained high.
The resulting oversupply created a massive price crash, with WTI particularly affected. For the first time in history, WTI went into negative territory, with a low of -$38 seen before quickly recovering.
Given that both WTI and Brent are primarily used for refining petrol, economic factors lie heavy on their prospects: in a recessionary outlook, petrol usage is often expected to go down, which means that Brent and WTI would trend downwards. From a supply perspective, the price goes up if production is slashed relative to current supply.
The most widely traded WTI Crude Oil contracts are traded on the NYMEX. Brent Crude’s primary exchange is the Intercontinental Exchange (ICE), but the CME Group also lists a Brent Crude contract, although volume in the CME contract is much lower.
In summary, oil quality isn’t the only consideration when it comes to pricing. Location, delivery logistics, and global supply and demand also play a part in oil trading.
Crude oil is one of the most important energy sources used globally. Due to the importance of this energy source, a vast market for physical trading, as well as derivatives trading exists.
Globally, crude oil is one of the most important fuel sources and, historically, has contributed to over a third of the world’s energy consumption. Discovering, extracting, shipping, and refining crude is a long process, and the infrastructure needed to support the process must be in place. This involves thousands of miles of oil pipelines across countries, storage facilities in major oil trading hubs, and multiple refineries.
In aggregate, the global oil industry is a multi-trillion-dollar industry.
Oil is especially important to businesses that heavily rely on fuel, such as airlines, plastic producers, and agricultural businesses. Being such an important source of energy, crude is a major import and export of numerous countries. The importance of this commodity creates a vast financial trading market for oil and oil derivatives such as futures, forwards, options, ETFs, ETPs, and CFDs.
10.0°
22.3°
33.1°
Extra Heavy
Heavy
Medium
Light
Classification by API Gravity
The quality of oil from various locations varies because it forms differently due to their geographical makeup. It exists in a multitude of forms, and its composition will determine how it is transported and refined.
Generally crude is classified by using both its physical and chemical characteristics. Based on density, oil is classified as light, medium, heavy, or extra heavy. Based on sulphur content, is divided into a sour and sweet category.
Crude oil is referred to as either light, medium, or heavy, based on its density. The American Petroleum Institute (API) gravity compares the density of crude to water. An API gravity higher than 10 means the oil is less dense than water and will float on it. An API gravity lower than 10 means the oil is denser than water and will sink in it.
0.5%
Sour
Sweet
Classification by Sulfur Content
Crude oil can also be referred to as sour or sweet, based on the sulphur content of the unrefined oil. Determining the sulphur content in crude oil is an important assessment of quality. Sulphur must be removed when refining crude. If it is not, when released into the atmosphere, it can cause pollution and acid rain.
Furthermore, high sulphur content can lead to the degradation of metals used in the refining process. When working with crude that contains hydrogen sulphide, it can also be dangerous because it poses a breathing hazard. Crude oil with a sulphur content greater than 0.5% is considered sour; less than 0.5% is sweet.
The figures above show the classifications for crude oil by API gravity and sulphur content.
Crude oil prices depend heavily on the two aforementioned classifications. Light crude is easier to refine and produces higher quantities of high-quality gasoline and diesel fuel. It also flows freely at room temperature. The heavier and denser the oil is, the harder it is to transport. Crude classified as extra heavy can also be referred to as bitumen. It is so thick that it must be diluted to transport.
Sulphur content is also very important in determining the quality, and thus the price, of crude. As noted, sulphur must be removed during the refining process. High quantities of sulphur also create problems related to transporting and working with the crude. For these reasons, sweet crude is generally priced higher relative to sour oil.
In general, light, sweet crude oil is the most desirable. And these two qualities make up the benchmark for premium oils.
However, there is one other very important factor that affects the price of crude – the location of extraction. If crude is extracted near the coast, it is much easier to transport globally. When it is extracted further inland, it must be transported via pipeline systems to refineries and, eventually, to the coast if it is to be transported globally.
When determining the price of crude oil, oil benchmarks are used as a pricing tool. There are various benchmark prices that correspond to specific oils, each with a distinct density and API gravity. The most commonly used benchmarks are West Texas Intermediate oil and Brent. Having an accessible price that corresponds to a specific geographical location, density, and gravity allows comparison and determination of the prices of different crude oils.
Two of the most popular oil benchmarks in the world are “Brent Crude” and “West Texas Intermediate” (WTI). Brent Crude oil is a blend drilled from below the North Sea and is one of the benchmarks for oil in the Middle East, Europe and Africa. Given the wider market wherein roughly two-thirds of the world’s oil is priced off Brent Crude futures, it is considered a global benchmark. WTI is a blend of several oils drilled and processed in the United States, thus, becoming a benchmark for the US oil market.
Since Brent is extracted at sea, large volumes of oil can quickly be transported in underwater pipelines. On the other hand, given that WTI reserves are primarily found inland, there are certain additional costs that could be factors in the final cost of the oil produced. However, US oil reserves are primarily extracted via new extraction technologies – such as well stimulation techniques and horizontal drilling – that are generally considered to be more effective. Due to the efficient usage of technology, WTI has become cheaper than Brent Crude. Historically, this tended to be the other way around.
wti
- Extracted from oil fields in the USA
- Primarily extracted in Louisiana, North Dakota and Texas
- Considered VERY light and VERY sweet
- API gravity ≈ 39.6°
- Sulfur Content ≈ .24%
- Landlocked – transportation onerous
brent
- Extracted from oil in North Sea
- Extracted from Brent, Forties, Osberg and Ekofisk oil fields
- Considered light and sweet
- API gravity ≈ 38°
- Sulfur Content ≈ .40%
- Waterborne – better for transportation
Given that not all crude oils are priced equally, the difference between the spot price of Brent Crude and WTI is often an area of interest to professional investors. This difference is referred to as the Brent/WTI Spread.
Global macroeconomics, along with supply and demand considerations, also affects the price of oil. For instance, a series of price actions undertaken between Saudi Arabia and Russia led to an event known as the OPEC Crash in 2020 wherein both the price of Brent Crude and WTI plummeted (with WTI significantly more affected).
On the heels of this was the COVID-19 pandemic and various movement restrictions enacted, which created an unprecedented “demand shock”: oil storage facilities were stocked full, and tankers lay berthed with full cargoes all over the world (sometimes for days) while production by major oil producers remained high.
The resulting oversupply created a massive price crash, with WTI particularly affected. For the first time in history, WTI went into negative territory, with a low of -$38 seen before quickly recovering.
Given that both WTI and Brent are primarily used for refining petrol, economic factors lie heavy on their prospects: in a recessionary outlook, petrol usage is often expected to go down, which means that Brent and WTI would trend downwards. From a supply perspective, the price goes up if production is slashed relative to current supply.
The most widely traded WTI Crude Oil contracts are traded on the NYMEX. Brent Crude’s primary exchange is the Intercontinental Exchange (ICE), but the CME Group also lists a Brent Crude contract, although volume in the CME contract is much lower.
In summary, oil quality isn’t the only consideration when it comes to pricing. Location, delivery logistics, and global supply and demand also play a part in oil trading.
Top Factors Influencing Oil Prices
Crude oil prices can fluctuate widely and rapidly, ranging from negative territory in 2020 to more than $90 per barrel less than two years later. Crude oil prices react to many variables, including supply and demand prospects and the perceived risk of market disruptions. Economic growth can drive up the demand for crude oil, while slowdowns tend to lower demand and prices.
The Organisation of the Petroleum Exporting Countries (OPEC) is an international alliance of crude oil exporters that negotiates export quotas for members in an attempt to influence global supply. One reason crude oil prices can be volatile is that supply and demand are relatively inelastic, which means they are slow to respond to price signals, requiring bigger price moves to bring the market into balance.
Other factors that influence crude oil prices are inventories, spare production capacity, geopolitical risks, futures market trading activity, commodity investment, exchange rates, and the state of equity markets.
Total crude oil production by OPEC is an important factor impacting oil prices. OPEC actively manages oil production among its members by setting production targets. When OPEC members agree to reduce production targets crude oil prices typically rise and vice versa.
OPEC members produce about 40% of the world’s crude oil and export about 60% of the total petroleum traded internationally. Therefore, OPEC’s action has a big influence on global oil prices.
OPEC has sought to influence global oil prices by limiting the supply of crude for decades. Governments, oil companies, and speculators, continue to pay close attention to every OPEC decision.
In 2016, largely in response to dramatically falling oil prices driven by significant increases in U.S. shale oil output, OPEC signed an agreement with 10 other oil-producing countries to create what is now known as OPEC+. Among these 10 countries was the world’s third-largest oil producer in 2022, Russia, which produced 13% of the world total output. The new alliance OPEC+ has an even bigger impact on oil prices.
Total oil production from OPEC members and OPEC+
OPEC members
28.7 million barrels per day
OPEC+ countries
16.5 million barrels per day
Oil production from counties outside the Organisation of the Petroleum Exporting Counties currently represents about 60% of world oil production.
Unlike OPEC oil production, which is subject to central coordination and in the hands of national oil companies, non-OPEC producers make independent decisions about oil production.
Total crude oil production by OPEC is an important factor impacting oil prices. OPEC actively manages oil production among its members by setting production targets. When OPEC members agree to reduce production targets crude oil prices typically rise and vice versa.
OPEC members produce about 40% of the world’s crude oil and export about 60% of the total petroleum traded internationally. Therefore, OPEC’s action has a big influence on global oil prices.
OPEC has sought to influence global oil prices by limiting the supply of crude for decades. Governments, oil companies, and speculators, continue to pay close attention to every OPEC decision.
In 2016, largely in response to dramatically falling oil prices driven by significant increases in U.S. shale oil output, OPEC signed an agreement with 10 other oil-producing countries to create what is now known as OPEC+. Among these 10 countries was the world’s third-largest oil producer in 2022, Russia, which produced 13% of the world total output. The new alliance OPEC+ has an even bigger impact on oil prices.
Total oil production from OPEC members and OPEC+
OPEC members
28.7 million barrels per day
OPEC+ countries
16.5 million barrels per day
Oil production from counties outside the Organisation of the Petroleum Exporting Counties currently represents about 60% of world oil production.
Unlike OPEC oil production, which is subject to central coordination and in the hands of national oil companies, non-OPEC producers make independent decisions about oil production.
Investing
Investors can invest in oil indirectly by purchasing shares in oil companies, such as Exxon Mobil, Royal Dutch Shell, BP, Saudi Aramco, and etc. However, investors should note that the correlation between spot crude oil prices and companies’ share prices can be loose.
While the price for a barrel of oil will obviously affect an energy company’s revenues, stock specific factors including exploration and production costs, borrowing and operational risks can also impact share prices.
Many of the biggest players have two sides to their business. Exploration and production operations are known as “upstream businesses”, while a range of refinery, petrochemical and retail fuel operations are referred to as “downstream businesses”.
When the price of crude oil rises, upstream business revenues may increase, but overall profits may be offset by cost rises and reduced margins from downstream operations. Therefore, even if investors could predict oil price movements accurately, there’s no guarantee the energy company would follow suit.
Futures are a type of derivative contract agreement to buy or sell a commodity at a set future date for a set price and are traded on futures exchanges. Futures on WTI and Brent crude oil are listed on U.S. and European exchanges. Because of their liquidity and price transparency, the contracts are used as a principal international pricing benchmark. WTI crude oil futures trade on the New York Mercantile Exchange (NYMEX), while Brent Crude’s primary exchange is the Intercontinental Exchange (ICE).
Oil futures are financial contracts in which a buyer and a seller agree to trade 1,000 barrels of oil per contract at a fixed price set for a future date. Crude oil futures give the buyer the obligation to buy the underlying commodity, and the seller the obligation to sell at, or before, the contract’s expiry.
Prior to expiration, a futures trader has three options: offset the position, rollover, or go to settlement.
- Offsetting/liquidating a position is a common method of exiting a trade, where the trader is able to realise all profits or losses without taking physical or cash delivery.
- Rollover is when a trader moves his position from the front month contract to another contract further in the future.
- If a trader has not offset or rolled his position prior to contract expiration, the contract will expire, and the trader will go to physical or cash settlement.
Futures contracts are generally disposed of just before expiration and new contracts are entered in order to avoid delivery or cash settlement, ensuring a continuous exposure is maintained.
Investors can invest in oil indirectly by purchasing shares in oil companies, such as Exxon Mobil, Royal Dutch Shell, BP, Saudi Aramco, and etc. However, investors should note that the correlation between spot crude oil prices and companies’ share prices can be loose.
While the price for a barrel of oil will obviously affect an energy company’s revenues, stock specific factors including exploration and production costs, borrowing and operational risks can also impact share prices.
Many of the biggest players have two sides to their business. Exploration and production operations are known as “upstream businesses”, while a range of refinery, petrochemical and retail fuel operations are referred to as “downstream businesses”.
When the price of crude oil rises, upstream business revenues may increase, but overall profits may be offset by cost rises and reduced margins from downstream operations. Therefore, even if investors could predict oil price movements accurately, there’s no guarantee the energy company would follow suit.
Investors can invest in oil indirectly by purchasing shares in oil companies, such as Exxon Mobil, Royal Dutch Shell, BP, Saudi Aramco, and etc. However, investors should note that the correlation between spot crude oil prices and companies’ share prices can be loose.
While the price for a barrel of oil will obviously affect an energy company’s revenues, stock specific factors including exploration and production costs, borrowing and operational risks can also impact share prices.
Many of the biggest players have two sides to their business. Exploration and production operations are known as “upstream businesses”, while a range of refinery, petrochemical and retail fuel operations are referred to as “downstream businesses”.
When the price of crude oil rises, upstream business revenues may increase, but overall profits may be offset by cost rises and reduced margins from downstream operations. Therefore, even if investors could predict oil price movements accurately, there’s no guarantee the energy company would follow suit.
Investors can invest in oil indirectly by purchasing shares in oil companies, such as Exxon Mobil, Royal Dutch Shell, BP, Saudi Aramco, and etc. However, investors should note that the correlation between spot crude oil prices and companies’ share prices can be loose.
While the price for a barrel of oil will obviously affect an energy company’s revenues, stock specific factors including exploration and production costs, borrowing and operational risks can also impact share prices.
Many of the biggest players have two sides to their business. Exploration and production operations are known as “upstream businesses”, while a range of refinery, petrochemical and retail fuel operations are referred to as “downstream businesses”.
When the price of crude oil rises, upstream business revenues may increase, but overall profits may be offset by cost rises and reduced margins from downstream operations. Therefore, even if investors could predict oil price movements accurately, there’s no guarantee the energy company would follow suit.
See the full range of our Commodity ETCs
Natural Gas
Natural gas is a naturally occurring fossil fuel composed primarily of methane, along with smaller amounts of other hydrocarbons, trace gases, and impurities. Natural gas reserves are found deep inside the earth, near other solid and liquid hydrocarbons beds like coal and crude oil. Natural gas is not used in its pure form, it is processed and converted into cleaner fuel. Many by-products are extracted while processing natural gas, such as propane, ethane, butane, carbon dioxide, nitrogen etc, which are widely used.
The U.S. is by far the largest consumer of natural gas, followed by Russia and China. The largest gas-producing country is also the US, then Russia, with a significant drop in volume for the third-highest producer, Iran. The industry benchmark for natural gas is the Henry Hub Natural Gas futures, traded on the Chicago Mercantile Exchange.
Overview
Natural gas is extracted using a variety of methods depending on geology and can be extracted from several sources:
- Conventional natural gas is trapped in reservoirs in porous rock such as sandstone and is easy to produce using traditional drilling methods.
- Unconventional natural gas is found in tight (non-porous) rock formations, such as shale. These resources are recovered through a combination of horizontal drilling and hydraulic fracturing.
Natural gas is extracted using a variety of methods depending on geology and can be extracted from several sources:
- Conventional natural gas is trapped in reservoirs in porous rock such as sandstone and is easy to produce using traditional drilling methods.
- Unconventional natural gas is found in tight (non-porous) rock formations, such as shale. These resources are recovered through a combination of horizontal drilling and hydraulic fracturing.
Top Factors Influencing Natural Gas Prices
Investing
Investors considering investing in natural gas futures should be aware that these contracts are very liquid and extremely active throughout the week.
Trading in natural gas futures is generally heaviest on Thursdays, when the U.S. Department of Energy releases its weekly natural gas storage report. Some of the top natural gas futures contracts include Henry Hub Natural Gas Futures, E-mini Natural Gas Futures and Delivered Natural Gas Futures.
Investors considering investing in natural gas futures should be aware that these contracts are very liquid and extremely active throughout the week.
Trading in natural gas futures is generally heaviest on Thursdays, when the U.S. Department of Energy releases its weekly natural gas storage report. Some of the top natural gas futures contracts include Henry Hub Natural Gas Futures, E-mini Natural Gas Futures and Delivered Natural Gas Futures.
See the full range of our Commodity ETPs
Copper
Overview
In many ways, the evolution of copper’s applicability has been a benchmark for human civilization’s progress. Given that it is tough, ductile and malleable, it is highly suitable for tube forming, wire drawing, spinning and deep drawing. Other key factors exhibited are:
- Heat conductivity
- Electrical conductivity
- Corrosion resistance
- Biofouling resistance
Top Factors Influencing Oil Prices
A big factor contributing to this has been strong consumption trends in Emerging Economies, as they continue to develop economically and create substantial demand.
One factor behind this could be the disparity between the source of minerals and the origin of refined end product.
While Chile is by far the largest producer of copper ore, China is by far the largest originator of refined copper. As per the United Nations’ “Metal Stocks in Society” report, the global per capita stock of copper in use in society is 35–55 kg. Much of this is in more-developed countries rather than less-developed countries. As a country develops economically, its net per capita consumption of copper goes up. The metal’s prices had bottomed in the aftermath of the 2007-08 Financial Crisis, along with prices in the rest of the commodity sector. However, the Chinese economy helped resuscitate demand for copper. In recent times, India has also picked up the mantle with per capita copper consumption expected to double within two years.
Global Recycled Copper Market Forecast
A big factor contributing to this has been strong consumption trends in Emerging Economies, as they continue to develop economically and create substantial demand.
One factor behind this could be the disparity between the source of minerals and the origin of refined end product.
While Chile is by far the largest producer of copper ore, China is by far the largest originator of refined copper. As per the United Nations’ “Metal Stocks in Society” report, the global per capita stock of copper in use in society is 35–55 kg. Much of this is in more-developed countries rather than less-developed countries. As a country develops economically, its net per capita consumption of copper goes up. The metal’s prices had bottomed in the aftermath of the 2007-08 Financial Crisis, along with prices in the rest of the commodity sector. However, the Chinese economy helped resuscitate demand for copper. In recent times, India has also picked up the mantle with per capita copper consumption expected to double within two years.
Global Recycled Copper Market Forecast
Investing
Investors could invest in copper indirectly by purchasing and trading shares of prominent mining companies such as Lundin Mining Corp, BHP Group, Freeport-McMoran, Teck Resources, Southern Copper and Rio Tinto. With proven copper reserves of 44.8 million tons, Southern Copper – in particular – is the largest holder of reported copper reserves in the world.
These stocks also typically show high trading volumes.
The difference in quantity is key to understanding the most involved investors in the market. Dominant participants in the copper market tend to be the likes of miners and distributors who use these contracts to hedge against price fluctuations in the metal. The CME contract aims to widen investor participation.
Options contracts have the same quantity as their futures counterparts. The CME lists contracts for 22 consecutive months while the LME lists out to 63 months.
Investors could invest in copper indirectly by purchasing and trading shares of prominent mining companies such as Lundin Mining Corp, BHP Group, Freeport-McMoran, Teck Resources, Southern Copper and Rio Tinto. With proven copper reserves of 44.8 million tons, Southern Copper – in particular – is the largest holder of reported copper reserves in the world.
These stocks also typically show high trading volumes.
The difference in quantity is key to understanding the most involved investors in the market. Dominant participants in the copper market tend to be the likes of miners and distributors who use these contracts to hedge against price fluctuations in the metal. The CME contract aims to widen investor participation.
Options contracts have the same quantity as their futures counterparts. The CME lists contracts for 22 consecutive months while the LME lists out to 63 months.
See the full range of our Commodity ETPs
Crude Oil
Data source: U.S. Energy Information Administration, Petroleum Supply Monthly, March 2023, preliminary data
Note: A 42-gallon (U.S.) barrel of crude oil yields about 45 gallons of petroleum products because of refinery processing gain. The sum of the products amounts in the image may not equal 45 because of independent rounding.
What petroleum products are made from crude oil?
After crude oil is removed from the ground, it is sent to a refinery where different parts of the crude oil are separated into useable petroleum products. A U.S. 42-gallon barrel of crude oil yields about 45 gallons of petroleum products.
The number of individual products produced varies from month-to-month and year-to-year as refineries adjust production to meet market demand and to maximize profitability.
Data source: U.S. Energy Information Administration, Petroleum Supply Monthly, March 2023, preliminary data
Note: A 42-gallon (U.S.) barrel of crude oil yields about 45 gallons of petroleum products because of refinery processing gain. The sum of the products amounts in the image may not equal 45 because of independent rounding.
Explore our new
WTI Crude Oil ETC
Explore our new
Brent Crude Oil ETC
Overview
Crude oil is one of the most important energy sources used globally. Due to the importance of this energy source, a vast market for physical trading, as well as derivatives trading exists.
Globally, crude oil is one of the most important fuel sources and, historically, has contributed to over a third of the world’s energy consumption. Discovering, extracting, shipping, and refining crude is a long process, and the infrastructure needed to support the process must be in place. This involves thousands of miles of oil pipelines across countries, storage facilities in major oil trading hubs, and multiple refineries.
In aggregate, the global oil industry is a multi-trillion-dollar industry.
Oil is especially important to businesses that heavily rely on fuel, such as airlines, plastic producers, and agricultural businesses. Being such an important source of energy, crude is a major import and export of numerous countries. The importance of this commodity creates a vast financial trading market for oil and oil derivatives such as futures, forwards, options, ETFs, ETPs, and CFDs.
10.0°
22.3°
33.1°
Extra Heavy
Heavy
Medium
Light
Classification by API Gravity
The quality of oil from various locations varies because it forms differently due to their geographical makeup. It exists in a multitude of forms, and its composition will determine how it is transported and refined.
Generally crude is classified by using both its physical and chemical characteristics. Based on density, oil is classified as light, medium, heavy, or extra heavy. Based on sulphur content, is divided into a sour and sweet category.
Crude oil is referred to as either light, medium, or heavy, based on its density. The American Petroleum Institute (API) gravity compares the density of crude to water. An API gravity higher than 10 means the oil is less dense than water and will float on it. An API gravity lower than 10 means the oil is denser than water and will sink in it.
0.5%
Sour
Sweet
Classification by Sulfur Content
Crude oil can also be referred to as sour or sweet, based on the sulphur content of the unrefined oil. Determining the sulphur content in crude oil is an important assessment of quality. Sulphur must be removed when refining crude. If it is not, when released into the atmosphere, it can cause pollution and acid rain.
Furthermore, high sulphur content can lead to the degradation of metals used in the refining process. When working with crude that contains hydrogen sulphide, it can also be dangerous because it poses a breathing hazard. Crude oil with a sulphur content greater than 0.5% is considered sour; less than 0.5% is sweet.
The figures above show the classifications for crude oil by API gravity and sulphur content.
Crude oil prices depend heavily on the two aforementioned classifications. Light crude is easier to refine and produces higher quantities of high-quality gasoline and diesel fuel. It also flows freely at room temperature. The heavier and denser the oil is, the harder it is to transport. Crude classified as extra heavy can also be referred to as bitumen. It is so thick that it must be diluted to transport.
Sulphur content is also very important in determining the quality, and thus the price, of crude. As noted, sulphur must be removed during the refining process. High quantities of sulphur also create problems related to transporting and working with the crude. For these reasons, sweet crude is generally priced higher relative to sour oil.
In general, light, sweet crude oil is the most desirable. And these two qualities make up the benchmark for premium oils.
However, there is one other very important factor that affects the price of crude – the location of extraction. If crude is extracted near the coast, it is much easier to transport globally. When it is extracted further inland, it must be transported via pipeline systems to refineries and, eventually, to the coast if it is to be transported globally.
When determining the price of crude oil, oil benchmarks are used as a pricing tool. There are various benchmark prices that correspond to specific oils, each with a distinct density and API gravity. The most commonly used benchmarks are West Texas Intermediate oil and Brent. Having an accessible price that corresponds to a specific geographical location, density, and gravity allows comparison and determination of the prices of different crude oils.
Two of the most popular oil benchmarks in the world are “Brent Crude” and “West Texas Intermediate” (WTI). Brent Crude oil is a blend drilled from below the North Sea and is one of the benchmarks for oil in the Middle East, Europe and Africa. Given the wider market wherein roughly two-thirds of the world’s oil is priced off Brent Crude futures, it is considered a global benchmark. WTI is a blend of several oils drilled and processed in the United States, thus, becoming a benchmark for the US oil market.
Since Brent is extracted at sea, large volumes of oil can quickly be transported in underwater pipelines. On the other hand, given that WTI reserves are primarily found inland, there are certain additional costs that could be factors in the final cost of the oil produced. However, US oil reserves are primarily extracted via new extraction technologies – such as well stimulation techniques and horizontal drilling – that are generally considered to be more effective. Due to the efficient usage of technology, WTI has become cheaper than Brent Crude. Historically, this tended to be the other way around.
wti
- Extracted from oil fields in the USA
- Primarily extracted in Louisiana, North Dakota and Texas
- Considered VERY light and VERY sweet
- API gravity ≈ 39.6°
- Sulfur Content ≈ .24%
- Landlocked – transportation onerous
brent
- Extracted from oil in North Sea
- Extracted from Brent, Forties, Osberg and Ekofisk oil fields
- Considered light and sweet
- API gravity ≈ 38°
- Sulfur Content ≈ .40%
- Waterborne – better for transportation
Given that not all crude oils are priced equally, the difference between the spot price of Brent Crude and WTI is often an area of interest to professional investors. This difference is referred to as the Brent/WTI Spread.
Global macroeconomics, along with supply and demand considerations, also affects the price of oil. For instance, a series of price actions undertaken between Saudi Arabia and Russia led to an event known as the OPEC Crash in 2020 wherein both the price of Brent Crude and WTI plummeted (with WTI significantly more affected).
On the heels of this was the COVID-19 pandemic and various movement restrictions enacted, which created an unprecedented “demand shock”: oil storage facilities were stocked full, and tankers lay berthed with full cargoes all over the world (sometimes for days) while production by major oil producers remained high.
The resulting oversupply created a massive price crash, with WTI particularly affected. For the first time in history, WTI went into negative territory, with a low of -$38 seen before quickly recovering.
Given that both WTI and Brent are primarily used for refining petrol, economic factors lie heavy on their prospects: in a recessionary outlook, petrol usage is often expected to go down, which means that Brent and WTI would trend downwards. From a supply perspective, the price goes up if production is slashed relative to current supply.
The most widely traded WTI Crude Oil contracts are traded on the NYMEX. Brent Crude’s primary exchange is the Intercontinental Exchange (ICE), but the CME Group also lists a Brent Crude contract, although volume in the CME contract is much lower.
In summary, oil quality isn’t the only consideration when it comes to pricing. Location, delivery logistics, and global supply and demand also play a part in oil trading.
Crude oil is one of the most important energy sources used globally. Due to the importance of this energy source, a vast market for physical trading, as well as derivatives trading exists.
Globally, crude oil is one of the most important fuel sources and, historically, has contributed to over a third of the world’s energy consumption. Discovering, extracting, shipping, and refining crude is a long process, and the infrastructure needed to support the process must be in place. This involves thousands of miles of oil pipelines across countries, storage facilities in major oil trading hubs, and multiple refineries.
In aggregate, the global oil industry is a multi-trillion-dollar industry.
Oil is especially important to businesses that heavily rely on fuel, such as airlines, plastic producers, and agricultural businesses. Being such an important source of energy, crude is a major import and export of numerous countries. The importance of this commodity creates a vast financial trading market for oil and oil derivatives such as futures, forwards, options, ETFs, ETPs, and CFDs.
10.0°
22.3°
33.1°
Extra Heavy
Heavy
Medium
Light
Classification by API Gravity
The quality of oil from various locations varies because it forms differently due to their geographical makeup. It exists in a multitude of forms, and its composition will determine how it is transported and refined.
Generally crude is classified by using both its physical and chemical characteristics. Based on density, oil is classified as light, medium, heavy, or extra heavy. Based on sulphur content, is divided into a sour and sweet category.
Crude oil is referred to as either light, medium, or heavy, based on its density. The American Petroleum Institute (API) gravity compares the density of crude to water. An API gravity higher than 10 means the oil is less dense than water and will float on it. An API gravity lower than 10 means the oil is denser than water and will sink in it.
0.5%
Sour
Sweet
Classification by Sulfur Content
Crude oil can also be referred to as sour or sweet, based on the sulphur content of the unrefined oil. Determining the sulphur content in crude oil is an important assessment of quality. Sulphur must be removed when refining crude. If it is not, when released into the atmosphere, it can cause pollution and acid rain.
Furthermore, high sulphur content can lead to the degradation of metals used in the refining process. When working with crude that contains hydrogen sulphide, it can also be dangerous because it poses a breathing hazard. Crude oil with a sulphur content greater than 0.5% is considered sour; less than 0.5% is sweet.
The figures above show the classifications for crude oil by API gravity and sulphur content.