Russia recently passed Saudi Arabia as the world’s largest producer of crude oil, pumping more than 9 million barrels per day in April, against Saudi Arabia’s 8.96 million.

Oil produced by Russian companies such as Sibneft, controlled by Roman Abramovich, now accounts for more than 10 per cent of the global output of almost 82 million barrels per day. Significantly, Russia does not belong to Opec, the cartel that produces a third of the world’s crude, and its growth in coming decades may undermine the might of Opec power-brokers such as Saudi Arabia and Iran.

The US, the third largest oil producer, at 7.9 million barrels per day, is also outside Opec. The US’s declining inland production is being offset by discoveries in the Gulf of Mexico. Britain produces 2.16 million barrels a day in the North Sea. Other big producers include China, at 3.4 million barrels a day, and Norway, at almost 3.25 million barrels.

However, Middle East Opec nations are likely to stay the centre of the oil industry for many years. They account for a fifth of daily output and half the world’s proven reserves of 1,048 billion barrels. Saudi Arabia alone has reserves of 260 billion barrels of crude.

USERS

China is the fastest-growing user of crude oil, increasing its thirst at about 13 per cent this year, as it burns more fuel in the power stations that drive its economic growth.

China will account for about 10 per cent of total global consumption of oil in 2004, which is expected to exceed 29 billion barrels per day, equal to 2.9 per cent of total proven global reserves. Although China is the second largest oil user, it remains far behind the US, which burns 20 million barrels of oil a day — about 3.2 billion litres — of which about two thirds is for transport.

The world’s main oil consumers can be divided into three main groups, led by North America, which consumes 24 million barrels of oil per day. Next largest is Asia, stretching from India to Japan and New Zealand, which burns 23 million barrels of oil daily. Europe and the Middle East are third, consuming 21 million barrels of oil per day.

Regions down the scale are Latin America, using 4.66 million barrels a day, and Africa, using 2.61 million barrels daily in 2003.

At national level, Britain consumes roughly 1.76 million barrels of oil-based products per day, ahead of Italy on 1.66 million.

MARKETS

Crude oil is the world’s most actively traded commodity. New York, London and Singapore are the principal hubs of this multibillion-dollar international business.

Deals are priced by reference to three benchmarks. Brent crude, named after the oilfield in the North Sea, is the leading yardstick globally, while West Texas Intermediate (WTI) is the measure for the price of “black gold” in North America.

A third benchmark, Oman/Dubai is used for trade in the Middle East. Aligned to this is a basket of oil prices compiled by Opec, which includes Saudi Arabia’s Arab Light and Nigerian Bonny Light.

Benchmarks are used because crude oil comes in differing qualities. Light crude is favoured for motor car petrol — half the oil in the US is used for gasoline — while the heavier blends are used for industrial fuels. Crudes with a sulphur content of below 0.5 per cent are deemed to be “sweet”, while those above this grade are termed “sour”.

Opec tries to keep crude’s price within a defined, steady range by controlling output, but soaring demand and fear of disruption in supply have pushed the price way above it.

TRADERS

The trade in crude oil originates from a desire by the world’s major producers to protect the price of their supplies. But over the past two decades, the market has also become a magnet for financial speculators.

Goldman Sachs, the investment bank, now claims to be the world’s biggest oil trader. Most other global investment banks also have a commodities division that deals in oil with a view to making money for the company and its clients. The oil majors, who strive to hedge profitability against adverse movements in prices, are also major players. Hedge funds have also waded into the markets.

Oil is traded on two exchanges: the New York Mercantile Exchange (Nymex) and the International Petroleum Exchange (IPE). Traders in colourful jackets buy and sell oil contracts in “pits”, using hand signals. At the IPE, daily turnover often touches $2 billion.

Traders buy physical deliveries of crude on these exchanges. A spot transaction is an agreement to sell or buy a shipment of oil at a set price and delivery date. Most of the action, however, is in the futures market, where traders haggle over the right to buy crude at an agreed price at a future date.