We have too much oil!

A report compiled last week by the International Energy Agency (IEA) said that ‘the world could find itself drowning in oil this year, and prices could continue to fall’ thanks specifically to the increased output from Iran that is balancing against the decreased supply elsewhere.

It is estimated further by the IEA that 285million barrels will be added to the stockpile this year

So far, we have witnessed two years of supply exceeding demand globally, and next year will push it into it’s third, with supply outstripping demand by over 1million barrels per day.

This has coincided too with the slowdown in China’s economy, resulting in far lower demand from China, but similarly other BRICS, as reported in our last issue of the Boar. It is estimated further by the IEA that 285million barrels will be added to the stockpile this year.

The markets have responded to this increase in supply, forcing the prices down to a 13 year low of less than $28 per barrel, it is expected to fall further however.

As noted in a report by the Guardian last week, the fall in prices was initially seen as good, meaning that it cut costs for most companies, whilst also increasing consumer spending power through lower prices for fuel.

This has happened in conjunction with the sanctions being lifted off Iran, the world’s fifth-largest oil producer. It will be interesting to see, over the next few months and years, what effect this will have on other oil producing countries, and how OPEC will respond. Further to this, the wider political impact might be interesting, with ‘fracking’ possibly being delayed in the United Kingdom, thanks to the lower prices of oil.