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Top Five Factors Affecting Oil Prices In 2015
Submitted by Nick Cunningham via OilPrice.com,
As we ring in the New Year, let’s take stock of where we are at with the oil markets. 2014 proved to be a momentous one for the oil markets, having seen prices cut in half in just six months.
The big question is what oil prices will do in 2015. Oil prices are unsustainably low right now – many high-cost oil producers and oil-producing regions are currently operating in the red. That may work in the short-term, but over the medium and long-term, companies will be forced out of the market, precipitating a price rise. The big question is when they will rise, and by how much.
So, what does that mean for oil prices in 2015? It is anybody’s guess, but here are the top five variables that will determine the trajectory of oil prices over the next 12 months, in no particular order.
1. China’s Economy. China is the second largest consumer of oil in the world and surpassed the United States as the largest importer of liquid fuels in late 2013. More importantly for oil prices is how much China’s consumption will increase in the coming years. According to the EIA, China is expected burn through 3 million more barrels per day in 2020 compared to 2012, accounting for about one-quarter of global demand growth over that timeframe. Although there is much uncertainty, China just wrapped up a disappointing fourth quarter, capping off its slowest annual growth in over a quarter century. It is not at all obvious that China will be able to halt its sliding growth rate, but the trajectory of China’s economy will significantly impact oil prices in 2015.
2. American shale. By the end of 2014, the U.S. was producing more than 9 million barrels of oil per day, an 80 percent increase from 2007. That output went a long way to creating a glut of oil, which helped send oil prices to the dumps in 2014. Having collectively shot themselves in the foot, the big question is how affected U.S. drillers will be by sub-$60 WTI. Rig counts continue to fall, spending is being slashed, but output has so far been stable. Whether the industry can maintain output given today’s prices or production begins to fall will have an enormous impact on international supplies, and as a result, prices.
3. Elasticity of Demand. The cure for low prices is low prices. That cliché can be applied to both the supply and demand side of the equation. Will oil selling at fire sale prices spur renewed demand? In some countries where oil is more regulated, low prices may not trickle down to the retail level. Countries like Indonesia are scrapping subsidies, which will be a boon to state coffers but will diminish the benefits to consumers. However, in the U.S., gasoline prices are now below $2.40 per gallon, more than 35 percent down from mid-2014. That has led to an uptick in gasoline consumption. In the waning days of 2014, the U.S. consumed gasoline at the highest daily rate since 2007. Low prices could spark higher demand, which in turn could send oil prices back up.
4. OPEC’s Next Move. OPEC deserves a lot of credit (or blame) for the remarkable downturn in oil prices last year. While many pundits have declared OPEC irrelevant after their decision to leave output unchanged, the mere fact that oil prices crashed after the cartel’s November meeting demonstrates just how influential they are over price swings. For now OPEC – or, more accurately, Saudi Arabia – has stood firm in its insistence not to cut production quotas. Whether that remains true through 2015 is up in the air.
5. Geopolitical flashpoints. In the not too distant past, a small supply disruption would send oil prices skyward. In early 2014, for example, violence in Libya blocked oil exports, contributing to a rise in oil prices. In Iraq, ISIS overran parts of the country and oil prices shot up on fears of supply outages. But since then, geopolitical flashpoints have had much less of an effect on the price of crude. During the last few weeks of 2014, violence flared up again in Libya. But after a brief increase in prices, the markets shrugged off the event. Nevertheless, history has demonstrated time and again that geopolitical crises are some of the most powerful short-term movers of oil prices.
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For now the futyures curve remains convinced prices bounce back...
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0. Tribe.
bribe.
If the longer term were of concern to these monopoly or cartel markets they would be up above 100 as they should be for fossil of cheap access and high EO/EI. The best commands the most, not the other way round. Its shale and tar sands that should be lowest on the market price curve; as it has the highest risk for client (being low quality oil) . If the client dictates (not the producer) that should be the rule.
But in a cartel market the big boys can PUSH costs on to the consumer by shutting down cheap and OPENING WIDE expensive. As they own the WHOLE OIL Patch.
Today as OPEC is now shattered and also divorced from the US/UK oil majors --as their political cronies-- they (Swing Saud) have more leg room to shake off the high cost producer-- when the HEDGE cannot withstand the pressure!
Its the financial hedge today that protects the Shale boy; but for how long?
Who will crack first ? Saud, Shale or Putin et al. ?
The assumptions were made discounting knock-on effects. All the little things that they work at avoiding thinking about will come home to roost.
6. Raging Worldwide Deflation
...yes, in everything you don't really need for survival especially...
This is a temporary blip as there are still 7+ billion people all competing for a better standard of living and all the consumable calories and commodity chemicals that make that possible.
Fiat is fucking irrelevant as some people will have access to those calories and commodity chemicals, but most will not.
same as it ever was.
The fall in oil prices, just like the prior run up; reflect a fraudulent currency system which distorts prices over and above the effects of supply and demand. How many products are mispriced due to political or manipulative reasons? We have seen gold prices remain flat or even down over the last three years in spite of record (and growing) global demand and dwindlng central bank supplies.
We are already seeing deflationary pressures in spite of unprecedented levels of currency creation by most of the central banks in the world. Credit based currency works as well as bolshevism. There is only a veneer of functionality. As long as we allow such a system to exist we can expect little as far as market driven pricing is concerned.
What is our currency really worth when a million dollar deposit yields less than a welfare cheque? Consider that commodities, our labor and most property are valued using that stuff.
Time to go long on wheelbarrows to haul the new Zimbabwe class currency.....
I wish the price of petrol was cut in half! Still around £1.10/L!
Down around 17%
Even if oil was free, the price of petrol would be still exhorbitant because of all the tax on it
Pure BS.
There is only one factor affecting oil prices right now: Langley, Virginia.
Blaire, do you work there? If not, where is your info coming from?
Old-school logic. I know... something that has not been taught in the U.S. in a very long time.
Funny how all markets are manipulated according to ZH readers, yet they believe the propaganda on the very sudden collapse of oil prices, just when the U.S. is doing all it can to hurt Russia.
Oh that's right, my bad, the whole world realized there was a "glut" in oil supplies just a few months ago. They woke up one morning and there it was, the "glut".
As though you don't see those things building up gradually.
The same US govt agency that was caught off guard by the fall of the Soviet Union and rise of AQ and now ISIS; flat-footed in their response to the nacent revolution in Iran and feckless during the Arab Spring? The same agency who enlisted an idiot to investigate yellow cake uranium sales to Iraq (who later shipped 550 metric tons to Canada), whose wife, while pregnant with twins, claimed to be a clandestine spy and expert on WMD, all the while working the cocktail party circuit in DC; these folks derailed a $90 billion a day market? Bubbles have a way of bursting as we saw with the housing market five years ago and dotcoms early last decade.
Caught off guard by the rise of ISIS? Ha ha ha ha ha!
Hey, do you actually believe that those dozens of Toyota pickup tricks and SUVs and all those guns AND ammo just sprout magically in the desert?
China per capita oil consumption is only 13% of the per capita consumption of America. India (per capita) uses only 5% that of America. Brazil (per capita) is 20% that of America.
At $51 a barrel, oil consumption in the BRICS will go up by at least a couple of million barrels a day and that will take up more than the surplus. Look for oil to stabilize at $65 or higher in less than 3 months.
"Oil prices are unsustainably low right now – many high-cost oil producers and oil-producing regions are currently operating in the red. That may work in the short-term, but over the medium and long-term, companies will be forced out of the market, precipitating a price rise. The big question is when they will rise, and by how much."
This reads like a lot of articles when silver went from $50 to $20. That's been a couple of years now and I'm still waiting for this:
"For now the futyures curve remains convinced prices bounce back.."
Still waiting.....
why wait? Anyway, aren't you comparing silver apples to oily oranges?
It will take months of low oil prices to kill off shale producers. If thats the plan.
Easy to do if demand is lower. Just keep pumping out oil and flooding supply.
Eventually shale closes down and the companies go out of business if it's a long enough time period.
we'll find out ...soon ... uh, what the bondholders want
"For now the futyures curve remains convinced prices bounce back...:
King Dollar: "Good Luck"
I'll cut it to two: Supply and Demand
not an expert (feel free to correct) ... but i think many leases are tied to PRODUCTION (royalties to landowner) ... if production stops (for very long) leases in jeopardy ... some producers may keep spigot open no matter what to keep leases alive
You are correct. According to my brother (in oil and gas 25+ years), once a company invests all that capital and resources to get a site/well producing, they will rarely pull the plug, especially on a leased site.
Baring the elimination of a significant amount of the earth's population, this is simply what one would expect as fiat money starts to die. Given that this time around it is a global collapse of fiat, a prolonged period of "deflation" in certain sectors of the economy is certainly not unexpected.
In any case, the liabilities are what they are and they are very much still on the balance sheet motherfuckers.
The law of thermodynamics, that you love Lof P, has always told us energy cannot be destroyed just transformed.
It applies to Fiat money. Some monies die and others replace them to pay for the immutable : human needs; food and clothes and shelter.
Money is first and foremost a means to an end, in a trade environment. Its capitalism that has made money into stored value and leverage tool. So if the tool gets broken it gets replaced as barter is now outmoded. The tool allows much faster trades; as long as we trade goods and services, not bubbles. It has become vital to useful human discourse and give n take.
US finance has made that tool now the be-all of life itself; Greenback is God and it blows bubbles!
Not such a clever idea. But...monies don't die as long as man lives.
Entropy is a real bitch. In any case, infinite growth of any one species in a closed system like earth is impossible.
The only constant is change, and that most certainly applies to the concept of money as well.
That is correct, can't shut the well in unless a force majeur is decleared but low prices don't amount to that. What does happen is that new wells don't get drilled if prices stay low for very long. That is what the Saudis are hoping is the case. However, rig operators will drop their prices sooner than later in order to make cash flow and if the cost of a rig drops by 50% per day, then more wells may be drilled.
As a landowner, I wouldn't mind two more wells producing at the same rate as my current shale well. I would welcome it, even at $40 oil and $3 gas.
A really nice big war would fix the price...
-> I like this situation when I have to pay less at gas station
-> I'm a ruskie troll and it's not allowed for me to show joy of dropping oil prices
-> I'm a russophobic troll that doesn't understand macroeconomics
-> I like to cut off my nose to spite my face
OIL should find some temporary support soon, but its long term fate is more decline... a lot more.
http://www.globaldeflationnews.com/oil-light-sweet-crudeelliott-wave-upd...
Wow. Walking in lieu of driving is really fucking them up! My bad.
why does nobody talk about currency variations. Like:
How will Chinese economy grow when their exports are 10-20% more expensive? Yuan has appreciated while all other currencies depreciated Vs USD.
The graphs artist can see 8 years into the future! Got a feeling he has "fighting Libyan terrorists in a mall parking lot" somewhere on the resume.
How did a Sandy Hook victim end up mourned as dying in the recent Pakistan school attack?
20,000 Ebola cases later…
HR 428 sponsors to increase pressure for release of 9/11 Commission’s 28 classified pages
Why you gotta go and be such a scumbag blog pimp? You're like the lowest of the low.
I would think the weather would have some effect on oil prices The way things are now a lot of people will be driviing South to get away from the freezing weather...and the Glaciers......somehow caused by Global Warming.
So what are the airlines doing with this tremendous windfall via gasoline prices? They are adding extra fees and crowding more seats into their planes while not reducing flight ticket prices. WTF? In their defense, however, their actions make as much sense as QE does.
I'm reminded of the killing that the Rothschilds made in 1815 when Napolean fell. Here is a quote:
Nathan Rothschild knowing that information is power stationed his trusted agent named Rothworth near the battlefield. As soon as the battle was over Rothworth quickly returned to London, delivering the news to Rothschild 24 hours ahead of Wellington's courier. A victory by Napoleon would have devastated Britain's financial system. Nathan stationed himself in his usual place next to an ancient pillar in the stock market. Knowing he would be observed he hung his head and began openly to sell huge numbers of British Government Bonds. Believing this to mean that Napoleon must have won, everyone started to sell their British Bonds as well. The bottom fell out of the market. Rothschild had his agents buying up all the hugely devalued bonds.
The simplest explanation is that SA is shaking out the market, perhaps with urging by US to beat up on R and V economically. Either way, SA as major source of supply can and does determine world price of oil, and can afford to sell low for awhile. Look for them to be snapping up failing properties worldwide. Meanwhile, oil is on sale and I'm buying.
Don't you consider possible that the results of the e-cat test had sometging to do with oil prices? I remember you were among the first to mention new energy when it was first presented back in 2011.
Here are the reasons oil is plunging to $40 http://www.marketwatch.com/story/here-are-the-reasons-oil-is-plunging-toward-60-2014-12-10
1- American shale
2- Price war
3- Weak demand
4- Dissipating geopolitical fears
5- Strong dollar
Top Five Factors Affecting Oil Prices In 2015
1. China’s Economy
2. American shale
3. Elasticity of Demand
4. OPEC’s Next Move
5. Geopolitical flashpoints
this is an opec, petro-dollar seminar, hopefully more people pay attention.
oil prices go up, dollars go down, oil prices go down, dollars go up, in 2002 the Saudi riyal was pegged to the usd.
some say the oil price fall is due to a global recession, and that's true, but what happens when there's a strong global market, read the above line.
high oil prices, lower usd, Saudi buys ust's, and gold, low oil prices, higher usd, Saudi cushioned from inflation, and some loss of oil income, (pegged riyal).
us. shale co.'s, Venezuela, Brazil, and Russia, are intruding on this satanic pairing.
I think it was 1984, Saudi gave opec, and the world notice, they will never again slow down production, or exports of their oil, in a weak market.
may I remind everyone, a little less than 5yrs. ago oil traded at $39.+ a barrel, for a short time, and a little more than 5yrs. ago, oil traded at $144.+ a barrel.
is it going to be different this time, as a non economist, I say good chance, there's three reasons.
#1. with the 2009 CRASH, the BIS printed, and moved some decimal points, and told the msm, do your thing, told the American govt. reporting agencies to come up with good #'s, and tell everyone things are fine, and oil moved up quickly, now we're in a global RECESION, there not as easy to paper over a global recession, not that their not trying.
#2. the counties, and co.'s who are ruining the opec-petro-dollar satanic pairing, are being hurt the worst, so there's no hurry there to raise prices.
#3. along with propaganda nearing perfection, this creates a perfect climate for a junta in the Ukraine, perfect climate to redistribute Germany into the BIS fold, perfect climate to create, train, arm, and fund a terrorist group, (isis), to fight their wars, and make it look as if your saving the world, there's no hurry to change things.