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What impacts global oil Prices?

Author: Veeresh Hiremath/Tuesday, November 6, 2018/Categories: Oil & Gas

What impacts global oil Prices?

Apart from demand and supply factors, international economic factors have had an impact on the global crude oil market, which witnessed volatile trends in terms of price movement.

WTI crude oil futures had plunged below $30 per barrel in late 2015 owing to bleak global demand for oil and a surplus of production in the world market. OPEC and non-OPEC member Russia vowed to cut production in late 2015 and this production cut was in force till the end of 2017 with intermittent revisions in the production cut accord. The step to cut production was taken to keep oil prices at comfortable levels so that each producing country can benefit from it. Reacting to supply shortfall, oil prices began to improve since 2015.

In the current calendar year, the rise in the crude oil price continued till October 2018 when the WTI crude oil futures almost hit a 4-year high. Adding to the surge in the oil price was imposition of sanctions by the US on Iran oil exports, which resulted into expected supply shortage. This move was opposed by various countries and they pledged to buy Iranian oil in protest against the US sanctions. However, this sanction impact was negated by a surge in oil supply from the US, Russia and Saudi Arabia. 
Oil production from these three countries reached 33 million barrels per day (bpd) for the first time in September. Russian energy ministry data showed that the country pumped 11.41 million barrels per day (bpd) of crude oil in October, a 30-year high. The Organization of the Petroleum Exporting Countries (OPEC) also boosted oil production in October to 33.31 million bpd, up 390,000 bpd and the highest by OPEC since 2016. 

Meanwhile, the US levied sanctions on Iranian oil exports which came into effect from November 4, 2018. However, the US granted temporary waiver of sanctions for eight nations including India. This news came as a blessing for these 8 countries.

Over and above the demand-supply factors, the crude oil market is getting affected by global economic growth. In the month of October, the International Monetary Fund downgraded the global economic growth forecast, which is likely to impact the demand for oil in the upcoming months.

Veeresh Hiremath is head of research, Karvy Comtrade Limited 

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Veeresh Hiremath

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1 comments on article "What impacts global oil Prices?"

KRamanayya

11/7/2018 8:49 PM

As long as automobile usage is in creasing oil and corresponding products demons will obviously increase. In such a case the production of oil should increase or not.In our opinion it should increase.so that t he rates can be maintained as usual.But what these Big powers are doing.They decrease the oil production using unnessary theories and complicated policies see that the economy of developing and under developed counties loose their control on economy.Especially In India with the increase of oil prises govt is simply raise hands and say they ate not responsible for the increase of prces

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