Oil prices are set to fall after couple of co-incidents, 5 reasons Chris Pedersen writes bellow and latest failure OPEC made in their meeting last Thursday. We believe this fall is dangerous for future of world economy, because it can cause in a boom later in the prices, as some of oil producers will go out of production due to low prices of oil and high expenses of extraction.
So our forecast is the prices will drop to low 60 USD per barrel and stays for a period of maximum 10 months, and then it will racket to 2008 high picks in a year. In the meantime oil products like Bitumen, Base oil etc will follow oil prices with a lag.
As oil prices continue to fall, analysts and producers are trying to
wrap their heads around the reasons and identify a floor price. Even
though crude benchmarks like Brent and WTI keep dropping, the cost of
finding oil continues to rise. What are some of the key drivers that
have created this paradox?
1. The U.S. Oil Boom
America’s oil boom is well documented. Shale oil production has grown
by roughly 4 million barrels per day (mbpd) since 2008. Imports from
OPEC have been cut in half and for the first time in 30 years, the U.S.
has stopped importing crude from Nigeria.
2. Libya is Back
Because of internal strife, analysts have until recently assumed that
Libya’s output would hover around 150,000-250,000 thousand barrels per
day. It turns out that Libya has sorted out their disruptions much
quicker than anticipated, producing 810,000 barrels per day in
September. Libyan officials told the Wall Street Journal last week that
they expect to produce a million barrels per day by the end of the month
and 1.2 million barrels a day by early next year.
3. OPEC Infighting
There have been numerous reports about the discord between OPEC
members, leading many to believe that OPEC will not be able to reign in
production like it has done so in the past. The Saudis and Kuwaitis have
reportedly been in an oil price war, repeatedly lowering their prices
in order to maintain their market share in Asia. John Kingston, the news
director at Platts, believes that the Saudis will not be willing to
give up market share like they have done during previous price drops.
4. Negative European Economic Outlook
European Central Bank president Mario Draghi has left investors
concerned about the continent’s slow growth. Germany’s exports were down
5.8 percent in August, stoking the fears of anxious investors that the
EU’s largest economy had double dipped into recession last quarter.
Across the Eurozone, the IMF again lowered its growth forecast to 0.8
percent in 2014 and 1.3 percent in 2015.
5. Tepid Asian Demand
Beyond slow economic growth and currency depreciation, a number of
Asian countries have begun cutting energy subsidies, resulting in higher
fuel costs despite a drop in global oil prices. In 2012, Asia’s top
spenders on energy subsidies, as a percentage of GDP included: Indonesia
3 percent; Thailand 2.6 percent; Vietnam 2.5 percent, Malaysia 2.3
percent, and India 2.3 percent. India is a primary example. Between
2008-2012, India’s diesel demand grew between 6 percent and 11 percent
annually. In January 2013, the country started cutting the subsidies of
diesel. Since then, diesel consumption has plateaued.
