The ongoing rivalries between the major oil-exporting countries are currently intensifying. Most large producers are hugely dependent on income from crude oil sales to support growth. While restricting supply drives up prices, pumping out more of the global economy’s lifeblood is often necessary to defend and increase market share. Tensions are therefore inevitable.
At the beginning of 2016, with global demand falling, discord among key producers resulted in a worldwide oil surplus, lowering prices to levels unseen since 2003. For those focused on commodities trading through reputable online brokers, sudden and significant falls in crude oil prices represent excellent opportunities to take up short positions on this volatile asset.
Speculation is another important factor supporting recent oil price evolution — especially after the deal reached in Vienna last November to cut production. According to the International Energy Agency (IEA), OPEC members have now achieved 91% baseline compliance, bringing production to 32 million barrels per day. OPEC might even be ready to extend its agreement beyond June to rebalance the overall market situation, since the initial agreement has not yet delivered the expected results.
Meanwhile, the number of wells in operation in the United States has once again risen, acting as a drag on oil prices which have now been falling for a month. On March 22nd, they reached their lowest level in four months, at $50.05 for Brent Crude, and $47.50 for West Texas Intermediate.
Traders worldwide will be monitoring the next OPEC ministerial meeting on May 25th in Vienna, an event which may provide clues as to how the main oil producers will behave during the second part of the year. According to the Saudi Arabian Minister of Energy, in making their decision, OPEC members will consider whether oil reserves are above the 5-year average. They may also take into account the overall confidence levels of market participants concerning the long-term outlook for the energy sector.
Photo Credit: Maartin Heerlien