The World Oil Market in 2006 tutor2u

The world oil market in 2006 A year of price volatility Oil prices peaked at almost $80 a barrel Brent crude ended the year at $60 a barrel Prices are still at historically high levels Slowdown in world economy including the USA will impact on global demand Oil production has increased – but OPEC is looking to make production cuts to put a floor on the world price

Price of Brent Crude in 2006

Futures prices have also dipped

Global oil consumption has risen

Driven by China

And other BRICs

But Brazil is also raising output

Gas guzzlers in America!

OPEC has stabilised production

Saudi Arabia has squeezed supply

October 2006 – OPEC announces a cut in oil production “OPEC Member Countries have decided to reduce their crude oil production in a bid to bring global oil supply more in line with actual demand. OPEC has agreed to cut output from the Organization, excluding Iraq, by 1.2 million barrels/day, effective November 1 st 2006 OPEC is concerned that global crude oil supplies were well in excess of demand, as the above average level of crude oil stocks in OECD countries demonstrated. They observed that the oversupply situation and imbalance in supply and demand fundamentals had destabilized the market.” Source: OPEC Observer

World crude oil stock levels

OPEC is now looking for quota cuts

But OPEC output is below capacity

OPEC’s share of world production

OPEC OPEC is a permanent, intergovernmental Organization, established in 1960 Its objective is to coordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry. The Organization now comprises 11 Members

High oil prices – little impact on world inflation – yet!

Suggestions for more research OPEC International Energy AgencyInternational Energy Agency BBC news –Oil prices rise on Opec cut news (Dec 2006)Oil prices rise on Opec cut news –Oil up as Opec plans output cut (Oct 2006)Oil up as Opec plans output cut –Oil markets explained (March 2003)Oil markets explained Guardian special reports on oilGuardian special reports on oil