As you can probably see, despite the current recovery, the global market of crude oil remains under downward pressure. Amid increasing oversupply, oil prices got down to 35 dollars per barrel and set a new 7-year low.
Iran is coming back, OPEC is reluctant to cut its oil production and is actually boosting it unofficially, the USA is now going to export its own crude oil after the U.S. Congress aborted the embargo imposed on American oil exports in the 1970s.
Apparently, Japan and Europe are welcoming the decision to cancel the embargo since they count on American oil. They seek diversification in terms of oil imports despite the fact that they don’t expect the USA to become a major oil exporter covering most of their needs. For Japan and Europe, it is all about lower oil import prices and higher energy security.
In the meantime, Saudi Arabia and other OPEC nations say that the only way they can cut their oil production is if other non-OPEC oil exporters do the same. The only thing they do is call for action but don’t do anything to make it happen. Iran is also urging other nations to cut their oil production while getting ready to reenter the market with its own oil whatever it takes. Under such circumstances, it is clear that nobody is going to yield his market share to the rival. On top of that, the current situation in the global market of crude oil reflects the geopolitical fight in the Middle East.
The geopolitical balance is changing. As you know, Russia is still the world’s biggest oil producer and exporter. Over the last couple of months, there has been a lot of foreign visitors to Moscow including high-ranking representatives of other major oil exporters. It seems that they are discussing the situation in the oil market and want to come up with some joint decisions.
Meanwhile, the global demand for crude oil is growing. However, it is lagging behind the pace of oil production and the inventories are high around the globe, which is why oil prices have little chance to recover significantly. Apparently, Iran is now one of the key factor to pay attention to when predicting oil prices for 2016. It is all about how big the oil supply from Iran is going to be throughout the year.
