In Oil & Companies News 14/04/2015
There is not even a single positive sign indicating the possible improvement of the oil prices in the near future. The rate of $55-60 is to remain for a long time. Oil production is still at its peak and even a little higher after Saudi Arabia made announcements about maintaining production at 10.5 million barrels. Part of it will be required for meeting the local demand during summer season while ensuring to keep a firm grip on its global market share.
Oil prices are still within the range of $53-55 without any hope of increasing to $60 per barrel which is the market expectation. These prices are bound to remain for some time even though some oil analysts are predicting that the prices could fall to as low as $40 due to introduction of more oil into the market by Iran and Iraq, while Saudi Arabia is pushing for higher daily production of more than 10 million barrels.
Some kind of miracle or catastrophe is required for the oil prices to increase, such as an agreement among Iran, Russia and Saudi Arabia for joint production cuts.
The basic factors for any kind of price increase are currently nonexistent especially with too much oil supply and insufficient demand. Every oil-producing country is producing as much as they can and store with the hope that the prices will increase in the near future.
Anyone can read the oil market situation easily these days and understand that the availability is much more than any immediate demand, but that everything seems to be under control. No adjustments or modifications are required particularly since the political situations seem to be under control and the world seems to be getting used to a few skirmishes as long as there are no major obstacles to oil supply especially with the agreement reached between Iran and the western world.
The fact that the oil price is below $60 per barrel is bad news for the annual budgets of most OPEC countries especially with deficits in the current accounts, and their expenditures exceeding their oil revenues. These countries have to cut down their expenditures and borrow from international banks. The rigid bank conditions and regulations may require them to cut down governmental spending, ease their economies and opt for privatization.
Even though these were the same advices given when the oil prices were high, we now have to follow them the hard way. We have not yet learnt any lesson in the past 40 years to find alternative source of income besides oil. Our fathers had given us this advice, which we are now passing on to our children. The truth is that we have failed. Will our children be able to do something to improve the situation or will some miracle occur for the oil prices to bounce back to above $60 per barrel?
