Maximizing Returns through Fundamental Analysis - Arabictrader.com

Crude Oil 41
called in-situ processing and involves heating the shale underground until it
fractures. When the shale fractures it releases gases and liquids, which are
then captured.
Oil sand deposits are found in many countries across the globe, but the
majority of oil sands are located in Venezuela and Canada. The oil is trapped
in a complex mixture of sand, water, and clay, which is why crude oil extraction
from the oil sands is costlier than current conventional drilling methods.
The crude oil within the oil sands is called bitumen and is separated from the
waste in the oil sands using one of two methods. The first method applies to
approximately 20 percent of the oil sand reserves; the sands are mined in an
open pit, and the bitumen is extracted using a hot water technique. The other
80 percent of the oil sands are buried deep below the surface and cannot be
extracted using open pit mining. 2 In this case, drilling occurs and steam is
injected into the deposit to lower the viscosity of the bitumen. The hot bitumen
is then brought to the surface using producing wells, and the sand is left
beneath the surface. This process is sure to become a large future method of
oil production, because most of the oil within the sands must be extracted in
this way.
PRODUCERS—OPEC AND NON-OPEC
Oil producers are classified according to two groupings. The first and most
famous of these is the Organization of Petroleum Exporting Countries
(OPEC). OPEC was created on September 14, 1960 in response to pressure
from major oil companies to lower payments and prices to oil producers. The
12 member states are Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya,
Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.
Indonesia’s membership is currently under review as it is no longer classified
as a petroleum exporting country. In addition, Iraq has had no quota
since March of 1998 because it is still trying to restore its oil production
lost during the Gulf Wars. OPEC members hold the majority of the spare
oil production capacity in the world and use it to change their production
levels dependent on both prices and demand for crude oil. OPEC is often
thought of as a cartel, yet it lists one of its primary missions as trying to
achieve stable oil prices which are fair and reasonable to both the consumer
and producer. 3 OPEC’s actions on the oil market have not always had stabilizing
affects however. It shocked the world and heightened inflation by
using oil as a weapon in the 1973 oil crisis.
The other producer group is non-OPEC, which consists of all oil producers
that are not members of OPEC. Within non-OPEC, the Former Soviet
Union (FSU) is often cited as a group because it is the largest single producer