The International Energy Agency (IEA) warns that the investments in oil production around the world have been shrinking for 2 years already. Yet, this tendency may well continue even in 2017. The experts say that this tendency may well lead to a strong deficit of crude oil in the international market since investment cuts inevitably lead to production cuts and less considerable supply.
In 2015 alone, the total investments in the oil industry around the globe shrank by as much as 8% all the way down to 1830 billion dollars. This is what the agency’s latest oil report reads. The IEA predicts that they are going to shrink for the second consecutive year for the first time in 30 years. Moreover, this time they expect a 24% drop all the way down to 450 billion dollars. At the same time, the experts do not deny the possibility of further investment cuts further down the road, including 2017. If that’s the case, this is definitely going to be an all-time record since the international oil industry has never seen 3 years of decline in a row.
Still, the IEA’s scenario is not an inevitable one. Years before the oil market crash, multiple oil companies around the globe already invested hundreds of billions of dollars in promising projects, and those projects may well start bearing fruit in the near future. In 2011-2014 the companies invested over 700 billion dollars a year in exploring and production. Some of those projects are just starting out and may well increase the overall production and supply.
A consulting firm named JBC Energy has studied 99 promising oil projects, which are likely to get started in 2016-2017. As a result, they predict that if those projects get started, they are going to increase the overall production capacities by at least 5,2 million barrels a day. However, some experts say that they are going to cover the declining production in the older oilfields. Anyway, the net increase may reach 2.7 million barrels a day. If so, the oversupply is going to grow even further, and we may find it even higher in early 2017 than 12 months before, when the prices got below $30/b.
At the same time, there are some short-term and secondary factors preventing the global market of crude oil from getting the balance restored in the near future. For example, Nigeria and Libya are getting ready to recover over 800K barrels a day after the recent local conflicts. If that’s the case, the IEA expects the global oversupply to nearly triple. At this point, its somewhere around 370K barrels a day.
When looking at the H4 chart of Brent oil with the help of the SRP tool designed by the SRP Department (AO_Zotik and WPR_VSmark) of Masterforex-V Academy, you can see the price forming a complex wave, which is wave B against the first wave or wave A of the corresponding wave level, the experts say.
