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Oil 2008-2014 - $100+ / Barrel


Energy prices rose in May 2009 following reports suggesting that the U.S. economy may have reached a turning point in the current recession, at least in some sectors. The price of West Texas Intermediate (WTI) crude oil was expected to remain relatively flat for the remainder of 2009, averaging about $55 per barrel over the second half of 2009. Assuming a modest economic improvement in 2010, WTI prices were expected to average about $58 in 2010. Price increases will likely be muted by the substantial surplus production capacity held by members of the Organization of the Petroleum Exporting Countries (OPEC), along with very high level of inventories among members of the Organization for Economic Cooperation and Development (OECD).

Crude oil prices fell to about $50 per barrel, about $100 per barrel off their peak level in 2008, and most forecasters projected 2009 global oil demand to be over 1 million barrels per day (bbl/d) lower than in 2008. In response, OPEC s met four times to consider production cuts to arrest the oil price decline -- then stable at about $50/barrel -- and cut rising oil inventories. With the U.S. average retail price for regular gasoline above the $2 per gallon mark, many Americans were wondering if even higher gasoline prices await this summer. Did the surge over $2 per gallon signal a re-run to the $3 level or higher this summer, adding to the budgetary strain already experienced by average consumers? Probably not. Gasoline demand has essentially flattened relative to year-ago levels and looks likely to remain flat or grow modestly over the summer, as long as retail prices remain as low relative to year-ago levels as they currently are and the economy does not worsen.

The plummeting price of oil had an impact on nations that restrict oil exploration and production to state-owned companies. Many used the revenues to further their ideological objectives and expand their influence, and falling prices could affect such policies. Russia's new military resurgence is considered to be fueled by petrodollars. Iran has used its oil revenues to extend its influence in the Middle East and defy sanctions aimed at blocking its nuclear ambitions. And Venezuelan President Hugo Chavez has gained power and influence to counter US policy in the Western Hemisphere because of the steady flow of oil money.

The Russian economy was among the hardest hit of any country during the global economic crisis. Russia - a major energy exporter - has not only suffered banking and stock woes, as in the rest of the world, but also a precipitous drop in the price of oil. The decline is affecting the Russian people and their economy.


The price for Brent crude oil on the London market reached a 30-month high of nearly $120 a barrel in February 2011. But the price retreated somewhat after Saudi Arabia, the world's biggest oil exporter, offered assurances that it would increase production to account for any cutback in Libya. The price of oil on the New York market topped $100 a barrel and then fell below that level.


Prices were high at the beginning of 2012 because oil demand was picking up again, supply was being constrained, with minor producers such as Syria, Yemen, and South Sudan off line, and Libya still off the market to a certain extent. The supply side also improved, partially because Iraq had come online. Iraq saw the opening of new oil fields like this one in West Qurna in April 2012, developed in partnership with Russian giant Lukoil. Its vice president, Sergei Nikiforov, said, Today, Iraq and Russia inaugurated the giant oilfield of West Qurna, one of the largest fields discovered in the world. More importantly because other OPEC members, particularly Saudi Arabia, have been increasing their production, in part in an effort to offset the loss of Iranian production because of the embargo.

Oil prices experienced a steady fall in the first half of 2012. Oil prices fell from around $125 per barrel in March 2012 to around $100 by June 2012. With the world economy slowing, by late June 2012 the price of oil on the New York market dropped below $80 a barrel for the first time since October 2011. By August 2012 benchmark US crude prices were hovering at around $90 per barrel, while Brent crude, which sets the price for oil imported into the US, was hovring abour $105 per barrel in London. Almost half of the Russian governments revenue comes from various taxes on oil and gas exports, which leaves the Russian economy highly vulnerable to a fall in oil prices.


The United States was the world's top producer of petroleum and natural gas hydrocarbons in 2013, surpassing Russia and Saudi Arabia. For the United States and Russia, total petroleum and natural gas hydrocarbon production, in energy content terms, was almost evenly split between petroleum and natural gas. Saudi Arabia's production, on the other hand, heavily favors petroleum. Since 2008, US petroleum production has increased 7 quadrillion Btu, with dramatic growth in Texas and North Dakota. Natural gas production has increased by 3 quadrillion Btu over the same period, with much of this growth coming from the eastern United States.

Comparisons of petroleum and natural gas production across countries are not always easy. Differences in energy content of crude oil, condensates, and natural gas produced throughout these countries make accurate conversions difficult. Total petroleum and natural gas hydrocarbon production estimates for the United States and Russia for 2011 and 2012 were roughly equivalentwithin 1 quadrillion Btu of one another. In 2013, however, the production estimates widen out, with the United States outproducing Russia by 5 quadrillion Btu.

Nigeria lost its biggest customer the United States. The oil thats being knocked out of the US import mix by the booming shale is the kind of oil that Nigeria produces light, sweet crude oil. That is no longer required by the refineries in Texas and Louisiana. So Nigeria is having to find new markets for its oil. Algeria, another OPEC member, finds itself in a similar situation, with its market in the US cut in half. China is a potential customer. Thats where fellow OPEC member Angola is doing a lot of business.

The Paris-based IEA said in its annual Medium-Term Oil Market Report released May 14, 2013 that increased production in the northern US state of North Dakota and in the oil sands of Canada "will be as transformative" to the world oil market over the next five years as increased oil demand in China has been over the last 15 years. IEA executive director Maria van der Hoeven said the North American advance "has set off a supply shock that is sending ripples throughout the world." The change has been so dramatic that the United States could surpass Saudi Arabia as the world's largest oil producer by 2020.

The agency said that during the next five years, North America will account for nearly two-thirds of the growth in the world's oil supply among countries outside the Mideast-based Organization of the Petroleum Exporting Countries (OPEC). OPEC currently accounts for about 35 percent of the world's oil production. New oil production technologies have played a key role in the North American advance chiefly hydraulic fracturing, commonly referred to as fracking, the process by which torrents of water and other materials into rock formations to loosen oil deposits for drilling. The boom in shale gas production in the US and its wide-ranging influence on markets rocked the gas world. Liquefied gas deliveries were redirected, altering the already fragile balance of demand and supply in traditional markets for pipeline gas in Europe. The psychological effect proved just as strong. Many began to speak about a "shale revolution," a technological breakthrough, and an upcoming realignment of the global gas industry. The governments of nations depending on the import of gas see in shale their salvation and freedom. Experts predict a decline of the "era of diktat" on the part of conventional natural gas exporters [notably Russia].

The number of earthquakes in the central and eastern United States has increased dramatically over the past few years, and scientists think the reason could be due to the disposal of wastewater associated with oil and gas production. More than 300 earthquakes above a magnitude 3.0 occurred in the three years from 2010-2012, compared with an average rate of 21 events per year observed from 1967-2000. The actual hydraulic fracturing process is only very rarely the direct cause of felt earthquakes.


Non-OPEC production was expected to significantly rise in 2014, by about 1.2 million barrels a day. The US and Canada would produce nearly all of that. The U.S. oil boom is due in large part to the hydraulic fracturing technique, commonly called fracking. It pumps chemicals underground to fracture shale formations, releasing more natural gas and oil. The industry says the method is safe for the environment, but critics say it can poison drinking water. OPEC estimates demand for its crude oil in 2014 will be around 29.6 million barrels a day, about one million barrels a day below 2013 production. The boom in production from the shale oil in the United States and the heavy oil sands in Canada is going up so fast that they are talking all of the incremental demand in the market. The market share is not great for OPEC, but as long as the price is over a hundred dollars theyll be happy.

Crude oil prices had been in decline since mid-June 2014 and by mid October 2014 had lost over 28 percent of their value since that time. Oil prices started dropping on 10 October 2014 after OPEC published its October report which indicates increases in oil production in OPEC-member countries. Shale oil production in the United States is profitable at a price of $80 per barrel. Rising oil production is due to techniques like fracking that collect oil that is missed by other methods, but does so at a higher cost -- between $50 and $80 per barrel of oil. Brent prices reached a four-year low of around $88 per barrel in October 2014 on abundant supply, slowing demand growth and a strong US dollar. Brent had fallen by over 20 percent since June 2014, when turmoil in Iraq lifted prices to $116 per barrel.

The IEA Oil Market Report (OMR) for October, released 14 October 2014, reduced its forecast of global oil demand for 2014 by 0.2 million barrels per day (mb/d) from the previous month, to 92.4 mb/d, on lower expectations of economic growth and the weak recent trend. Annual demand growth for 2014 was projected at 0.7 mb/d, rising tentatively to 1.1 mb/d in 2015 as the macroeconomic backdrop improved.

Global oil prices plunged to new multiyear lows after Saudi Arabia said it would cut its export price for American customers to try to compete with burgeoning oil production in the United States. The price for West Texas Intermediate oil drilled in the US dropped 04 November 2014 to as low as $75.84 a barrel, its lowest point in three years and down from $100 a barrel in July. Brent crude, drilled in the North Sea, fell to $82.08, a four-year low.

The Organization of Petroleum Exporting Countries decided on November 27, 2014 to maintain current levels of production despite a worldwide oil glut that has driven market prices down more than 30 percent since June 2014. Meeting in Vienna, Austria, OPEC oil ministers decided to maintain the present output target of 30 million barrels a day. After the announcement, the price of benchmark Brent crude fell $4, to a four-year low of $73 a barrel.

The OPEC meeting, widely seen as one of the most crucial in years, came as shale oil production continues to surge in the United States. Forecasters say U.S. shale extraction will produce an additional 1 million barrels a day in 2014 and 1 million barrels more in 2015.

Oil prices remained in freefall after OPEC agreed to keep their oil supply steady despite falling global demand. US crude plunged a staggering ten percent in its biggest one-day drop in over five years on 28 November 2014, and Brent crude dropped below US$70 a barrel.

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Page last modified: 28-01-2016 00:47:38 ZULU