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Page added on December 31, 2018

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Oversupply Will Keep Oil Prices Under Pressure

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An energy information provider, Argus Media stated that an oversupply of oil will ensure the prices are under intense pressure even after entering the New Year. However, with the passing time, the cuts of the producers will ensure the crude prices are boosted. This condition refers to the scenario in which the balance between the supply and demand will be established. In fact, the editor for Crude Oil at Argus, Azlin Ahmad stated that the prices will stabilize by the end of the second quarter. Argus Media has also forecasted that the Brent crude will trade at $65 each barrel in the first quarter while increasing by $3 each barrel in the second quarter. By the end of the third quarter, the prices per barrel will reach $70 per barrel. It has stated by the end of the year, prices per barrel may hike up to $80.

During October, the oil prices spiked to a level that broke all the records of the past 4 years. However, the prices have dropped by a third of the peak price. The international benchmark, Brent Oil futures were trading at $53.60 a barrel, which is a steep decline of 20% witnessed in 2018. This year, the story may take a different turn as the prices are about to catch the pace in the upcoming year.

Russia along with non-OPEC and OPEC oil producers have agreed that the output will be curbed by none less than 1.2 million barrels every day. The quantity is 1% of the comprehensive global demand.

The organization that is crewed with 15 members stated that it has planned to reduce the output of total numbers of barrels by 800,000 barrels every day while allied non-OPEC oil producers will add to the endeavor of reducing the oversupply by cutting down 400,000 barrels every day.

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6 Comments on "Oversupply Will Keep Oil Prices Under Pressure"

  1. Chrome Mags on Mon, 31st Dec 2018 7:06 pm 

    Philosophy is a walk on slippery rocks
    Religion is a smile on a dog
    I don’t know too much
    But I know what I know
    If you know what I mean
    Throw me in before I get too deep

    I’m tired of speculative articles about a future in which only guesses can be tossed about.

  2. Pete Bauer on Mon, 31st Dec 2018 7:46 pm 

    Whether peakoil is because of peak production or peak demand needs to be seen.
    Battery prices are at $176 / KWh as per bloomberg’s latest report at the end of 2018.

    It may hit 150 in 2019, 125 in 2020 and 100 in 2021.

    At this point an electric vehicle could be as cheap as gasmobile and much cheaper than dieselmobile.
    Are we getting closer to peak oil.

  3. Go Speed Racer on Tue, 1st Jan 2019 12:31 am 

    Happy New Year Chrome Mags, and Pete,

    Firecrackers, beer, and a tire-fire,
    over at my backyard, come on over!

    And right at midnight, we’re blowing up
    a plastic outhouse!

    Best Wishes for 2019 !

  4. Davy on Wed, 2nd Jan 2019 12:16 pm 

    “The New Oil Order”

    “In the decades preceding the arrival of U.S. shale oil, the oil market had only one stabilizing force, namely OPEC. The reason the oil market was structured as such was due to the nature of conventional oil production, most non-OPEC oil production prior to U.S. shale oil fell in one of two categories: major offshore projects that took 5 to 7 years to build (North Sea, Gulf of Mexico … etc.) or mature conventional onshore fields (U.S. conventional fields, Russian Siberian fields … etc.); both of these conventional oil supply sources were either non-responsive, or only slowly reactive, to changes in the oil price, major offshore oil projects tended to come online regardless of the oil price environment, while conventional onshore oil production with shallow decline rates (sub-10 percent) meant that even a slowdown in drilling would not impact total production in any meaningful way for an extended period of time.”

    “The arrival of U.S. shale oil in size to the scene in 2014 has upended the OPEC/non-OPEC balancing act, by introducing a medium-term oil supply balancing mechanism that in the long run will prove supportive to the oil market, and especially so to non-shale oil producers.”

    “U.S. shale oil dynamics It is clear that U.S. shale oil production is the most responsive free market oil to changes in oil prices. As U.S. shale oil production comes to represent a bigger piece of the pie in the global oil supply picture, its elastic characteristics will increasingly have a major impact on the global oil market.”

    “What’s important to keep in mind is that as U.S. production grows, and as legacy declines continue to cannibalize a larger portion of new U.S. shale oil production, U.S. production becomes increasingly sensitive to slight changes in drilling and completion activity. Those relatively small changes can have major implications for global oil balances. This situation is unprecedented in the history of the oil market for no global oil supply source has ever matched the sharp decline rate associated with U.S. shale oil production. Long-Term Implications As we have seen from the above, U.S. shale oil is highly responsive to changes in oil prices, this, in turn, introduces a new balancing force in the global oil market, a force that acts as a floor should prices decline under $50 a barrel (the economic threshold to produce shale oil). This same force also acts as a ceiling should prices rise above $70 WTI, with most shale fields becoming profitable at that price point. Contrary to conventional wisdom, the implications of the shale phenomenon are quite positive for non-shale oil companies. Its true that U.S. shale oil introduces an upper band to oil prices, however, this is not a negative since sharp spikes in oil prices are generally harmful for the global economy and for oil demand growth; this is especially the case in an age where electrified transportation is gaining market share. Most importantly, U.S. shale oil’s reactivity to price declines represents an economic floor to oil prices that will supplement OPEC efforts to balance the oil market”

  5. Davy on Wed, 2nd Jan 2019 1:02 pm 

    Oops, sorry again everyone for another misleading link. I have problems being truthful.

  6. GregT identity theft on Wed, 2nd Jan 2019 1:07 pm 

    Davy on Wed, 2nd Jan 2019 1:02 pm

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