Oil market somehow balanced and crude began to trade above $60 following the last two and a half years, during which the industry has experienced its deepest downturn since at least the 1990s.
As history repeats itself, after every oil bust comes a recovery, if not a boom. But this time a recovery has been too volatile and sensitive. There are undoubtedly some disturbances in and outside the market that suggest it will require some time before oil nations return to calmer waters.
Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend that there are for sure some dark clouds on the horizon that can generate large price responses.
He said that oil demand is still growing, while supply is increasingly feeling the effects of years of extremely low investments worldwide, which can push prices up.
"The possible shale oil production volume surge could be lower than expected as costs of drilling and production in shale are increasing. This could lead to lower than expected overall volumes additionally on the market. If this is the case, then prices could become very volatile with a large upwards potential," he said.
At the same time, according to the energy analyst, totally misunderstood or even not assessed at all is the fact that shale oil has a higher API, which means it is not competing with OPEC main volumes, while at same time, refineries worldwide are looking mainly for lower API (light crudes).
"This will constrain impact shale oil, except if there is increased refinery capacity and export of petroleum products from the US," he noted.
Widdershoven added that situation in Venezuela, where oil production falling to a nearly three-decade low, is almost out of control.
"If there is additional struggle due to elections, and increased trade union issues, already struggling production could be much lower even than currently is the case. Taking out another 500,000 bpd would be pushing prices even up higher," he noted.
Widdershoven stressed that an increased tension in Middle East, that is, between Turkey-Russia and Arab world would push prices also up, further noting that ongoing instability in another cartel nation- Iran will be a major issue to keep an eye on, as this would defer additional volumes.
Theretofore, the oil markets could be poised for another wild ride while analysts predicting a price of anywhere between $40 and $70 by the end of the year. But presently, the crude prices remain half what they were in mid-2014, with a high chance of a new price shock – either up or down at any time.
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