The global oil market has been in a slump for the past three years, but could it be turning a corner?
Crude prices are now up 20 percent from June lows, which means the industry is officially back in a bull market for the first time this year.
So what’s behind rising oil prices?
- According to the latest quarterly report from the International Energy Agency, oil demand is up 2.4 percent year on year.
- On the supply side, production cuts by OPEC, Russia and other producers have also helped tackle the oil glut.
- And geopolitical issues are also a factor: An independence vote in the oil-rich Iraqi Kurdish region has inflamed tensions. Turkey has threatened crippling restrictions on oil trading with Iraqi Kurds.
The oil industry is doing fundamentally well, there’s an equilibrium of demand and supply. Stocks are being slowly reduced. I do not expect any dramatic changes in prices.
Professor Giacomo Luciani from the Graduate Institute in Geneva discusses the current state of the oil market.
“The oil industry is doing fundamentally well, there’s an equilibrium of demand and supply. Stocks are being slowly reduced. I do not expect any dramatic changes in prices. Prices are kept within a fairly narrow rage – which we may define as $50-80 [a barrel]. Maybe as we reach 2020, they may get to $65, but I am sceptical about any sudden change in prices, except if there’s some kind of security or military threat, which would then start a speculative flare-up,” explains Luciani.
According to Luciani, what’s happening “in the Kurdish region is certainly impacting speculative tendency towards higher prices, but what’s really behind it is demand. Demand increases higher than expected, which is not surprising because prices have been low, so consumers are keen to use more oil products … While prices may be strong, we’ll have to see what the response of supply will be – especially supply in the US for shale oil which is likely to increase rapidly.”
Luciani believes that prices are heading towards $60 a barrel, but won’t rise beyond that level.
“At $60 per barrel, there are plenty of places especially in the US and Canada that become quite interesting, quite profitable, so supply will increase. Also, the discipline among oil-producing nations may start to erode. They may start saying ‘there’s no need to maintain production at a low level’, so the tendency and temptation to increase supply will also be there. So, I don’t expect prices to rise above $60 per barrel at any point in time in the next year.”
Also on this episode of Counting the Cost:
The Uber effect: As legal challenges grow, can Uber’s business model survive in its present form?Technology giant Uber has changed how people all over the world hail a taxi. Uber’s popularity has made it an indispensable car-ride service in cities all over the world.
The $68bn company is planning an IPO next year. But in 2017, a series of scandals over its business practices and its treatment of workers has kept Uber in the headlines for all the wrong reasons. Additionally, it’s being stripped of its licence to operate in London, one of the biggest markets for cabs in the world.
Carl Benedikt Frey from the Oxford Martin School in the UK offers his take on the impact of the virtual labour market.
Uruguay marijuana: Uruguay is the first country in the world to make it legal to grow and sell marijuana. But now, the new industry is facing a threat no one predicted, as Daniel Schweimler reports from Montevideo.
Saudi women driving: Saudi Arabia ended the kingdom’s reign as the only country in the world that bans women from driving. The move is less about addressing gender inequality than an effort to modernise its economy. Women still only make up only 20 percent of the workforce. According to the World Bank, women face gender-based job restrictions in 100 economies around the world. Saudi is also planning to attract global investors when it sells off part of state-owned oil company Saudi Aramco on the stock market next year.
Electric cars: The world’s largest mining company, BHP Billiton said 2017 will be a revolutionary year for electric cars. It’s predicting electric vehicles will make up around eight percent of the global car fleet by 2035.
And that electric future will be felt first in the metals market, especially copper. Fully electric vehicles require four times as much copper wiring as a petrol or diesel car.
Aviation jobs under threat: A trade dispute between the US and Canada is threatening the jobs of thousands of aircraft workers beyond North America. It involves US aviation giant Boeing and Canada’s Bombardier. The US has slapped tariffs on the new Bombardier C-series plane. Boeing claims the new aircraft are being unfairly subsidised. Northern Ireland is caught up in the row, too, as Daniel Lak reports from Toronto.
Estonia technology innovation: The tiny Baltic country of Estonia already has one of the internet’s most recognisable brands, but how do you replicate Skype’s success? In Tallinn, Rory Challands explores how Estonia, the birthplace of Skype, now wants to be a digital trailbreaker for the rest of the world.
Source: Al Jazeera