Oil Price Outlook | Russell T. Rudy Energy LLC
Oil prices are changing (unfortunately dropping) so quickly it is difficult to follow specific prices, much less predict them. However, we are trying to follow the factors that we believe influence prices. Some forecasts are for continued deterioration of prices through midyear 2015. Recent developments lend credence to this prediction. Demand weakness, increasing inventories, new supplies, negotiations with Iran, Saudi Arabia’s continuing dominance within OPEC, and recent crude export ban rulings all make domestic price prospects disturbing.
Weak demand for crude continues and oil that cannot find a market is increasingly being stored. Initial attempts at significant price recovery will be delayed until these stored volumes can be eliminated.
Political upheaval in Libya has limited supply from that country which would otherwise be a positive factor for prices. However, Russia and Iraq are increasing production to levels which more than offset the reductions in Libya. This upward trend in worldwide supply will only continue as a number of fields in West Africa, Brazil, the U. S., and Canada continue to come on stream.
Apparently the U. S. and Iran are making progress in their negotiations regarding the latter’s nuclear capability. There has been progress on some issues while others remain contentious. However, both sides seem optimistic that an agreement could be in place by mid-year 2015. If this happens, sanctions against Iran could be lifted with significant crude volumes flowing into the world market, further threatening prices.
In spite of pressure from Algeria and Iran, Saudi Arabia seems to be firmly in charge of OPEC and shows no signs of relenting. The kingdom refuses to consider production cutbacks even if non-OPEC countries do so. Further, it has instructed OPEC members to continue to invest in projects which would increase production, regardless of current low prices.
Finally, U. S. operators were hoping for some relief from the crude export ban. However, recent rulings by the feds basically state that condensate which is separated at the lease does not qualify as a petroleum product, and as such, cannot be exported. Only condensate which has liquefied as a result of distillation and subsequent condensation could qualify for export.
