Oil trade: Difficulties and opportunities
Posted: Sat 13 Jul 2013, 19:29:33
Oil trade: Difficulties and opportunities
arabnews
A typical downturn cycle for demand for OPEC oil has already started this year and is expected to intensify next year.
That will bring with it not only the usual bitter quarrels between the organization’s member states on the tough issues of production discipline, but also how other producers will react to safeguard their own interest and help keep prices relatively high and stable.
The recent release of the monthly reports by both OPEC and its sister organization that groups the main consumers, the International Energy Agency (IEA) paints a clear picture of tough days ahead.
Though demand is expected to increase due to improved economic conditions after almost four years following the world financial and economic crises, supplies from non-OPEC producers are expected to grow as well, eating into the potential share of the market residual supplier, OPEC.
The July Monthly Market Report published by the organization expects that call on its crude next year will top 29.61 million barrels per day (bpd), which means a drop of 250,000 bpd, and that follows an anticipated drop of 420,000 bpd this year.
Moreover, such levels of call will put OPEC production at below its current level of 30.37 million bpd and the official ceiling of 30 million bpd.
More significantly with demand for OPEC oil in the coming fourth quarter expected to be around 30.55 million bpd and between the fourth quarter and the first quarter of next year, call on OPEC oil is expected to see a decline of 1.27 million bpd.
Still the new industry can do with a drop of 10 percent annually in reduced cost, but the question every one avoids is what is going to happen if OPEC refused to take the brunt and defend even unofficially a minimum level of a barrel price. Will the world see a return to a one digit price for the barrel of oil?
At that time, the US drops its orthodox belief in market forces and sent its vice president to convince Saudi Arabia to lead an effort to restore some stability to the market and rise up prices, which it did. On the background was the heavy losses incurred by the US oil industry.
It is time for all market players to sit and agree on ways to achieving market and price stability.
arabnews