Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits in natural underground pools or reservoirs and remains liquid at atmospheric pressure and temperature. Although it is often called “black gold,” crude oil has a wide ranging viscosity and can vary in colour to various shades of black and yellow depending on its hydrocarbon composition. Crude oil can be refined to produce usable products such as gasoline, diesel and various forms of petrochemicals. Even though most crude oil is produced by a relatively small number of companies, and often located in remote locations far from the point of consumption, trading in crude oil on a global basis has always been robust. Nearly 80% of international crude oil is transported through waterways in large tankers and most of the rest by inland pipelines.

The majority of oil reserves in the world is in the Middle East, at 48 percent of the known and identified reserves. This is followed by North America, Africa, Central and South America, Eurasia, Asia and Oceania, and Europe. OPEC controls almost 40 percent of the world’s crude oil, accounts for about 75 percent of the world’s proven oil reserves, and exports 55 percent of the oil traded internationally.

In oil trading, risk management techniques are extremely important for the various stakeholders and participants, such as producers, exporters, marketers, processors, and SMEs. Modern techniques and strategies, including market-based risk management financial instruments like Crude Oil Futures, offered on the MCX platform can improve efficiencies and consolidate competitiveness through price risk management.