Battle for Oil Market Control Could Have a Lasting Impact

Source: Short-Term Energy Outlook, December 2014.
A significant variable in global oil supplies is the large amount of OPEC production that cannot be exported. For example, Libya and Iran may produce more or less oil, depending on whether their problems become better or worse.

Expectations of continued USD 100/bbl of oil were shattered by a sharp price drop last year that eventually halved the prices of benchmark crudes. Prices were still sinking at the start of the year to lows not seen since 2009 due to a global oversupply of oil.

The US has gone from the world’s best import market for oil to a market moving producer, and a large and growing exporter of refined products. Total US output rose from 5 million B/D in 2008 to 9.2 million B/D in December, according to the US Energy Information Administration (EIA), which predicts 9.3 million B/D by the end of this year.

While the magnitude of the drop rivals the one in 2009, the cause of it resembles the longer-lasting downturn that began in the 1980s, after a run of high prices rapidly expanded oil supplies, creating a glut.

The rise of oil flowing from US shale formations has sparked a battle for control of the market with OPEC, which has been unwilling to reduce its production to prop up prices because that would further erode its share of a market where production outside OPEC rose by 2 million B/D in 2014, according to the EIA, which said demand was up by 900,000 B/D.

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Battle for Oil Market Control Could Have a Lasting Impact

Stephen Rassenfoss, JPT Emerging Technology Senior Editor

01 February 2015

Volume: 67 | Issue: 2

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