Oil Production Slowdown Temporarily Sends Up Price

Sarang Ahuja’s latest post:

sarang ahuja Oil_well

The surprising news that stockpiles of domestic crude oil rose at a slower rate than at any other time this year sent the price of oil up yesterday. Still, there is a debate among analysts about where the price will go from here. From a New York Times article on the subject: “In a report on Wednesday, the International Energy Agency said that the outlook for oil prices remained uncertain. Given the price collapse, ‘one might be hoping for more clarity on supply and demand,’ the agency acknowledged in its monthly Oil Market Report. ‘Yet in some ways, the outlook is only getting murkier.’”

Some, like Citigroup, predict that prices will remain at a depressed level, and that they may continue to fall “as output remains high, supply builds up and investors who had helped prop up prices begin to sell.” Others, like Royal Dutch Shell, are “expecting prices to recover much of their recent drop over the next few years.”

One wildcard in the market right now is the effect of the proposed nuclear deal with Iran which would lift, or at least sharply reduce, sanctions on the country which is a major oil producer. Though it would take some time for Iran to increase their oil production for a wider world market, their already stored oil could be available for export relatively quickly.

Whatever the future holds, the current state of oil in the US is this: domestic stockpiles have increased for 14 straight weeks, and now stand at over 480 Million barrels, which is the highest level since 1982.

from Sarang Ahuja http://ift.tt/1JNfI7d

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