NYMEX crude oil futures fell back from above $100 per barrel at the beginning of year 2014. How will prices move in the crude oil market through this year?
Crude oil prices are fluctuating with being stimulated by various factors in the short term, however, long term movements are eventually affected by the supply and demand situation. A supply shortage usually lifts prices, while the surplus tendency depresses the market.
Global petroleum supply and demand balance is forecasted at a little bit surplus during the first half of 2014 and predicted to turn into a shortage by 0.5-1.0 million barrels per day in the second half of the year, according to the latest energy outlook issued by the United States Energy Information Administration.
EIA expects WTI crude oil prices could move about mid-$90/bbl through the year. But prices might stay at the lower $90/bbl level in the first half and rise to above $100/bbl in the second half, if the supply and demand balance follows the institute's prediction.
Organizations other than EIA like the International Energy Agency and the Organization of Petroleum Exporting Countries also forecast steady growth of petroleum demand in 2014. Meanwhile, they predict stronger increase of petroleum supply from non-OPEC producers. Therefore, needs for OPEC crude oil are expected to be below the 30 million bpd of production quota during 2014.
Since recent total crude oil production by OPEC member nations are estimated at the middle of 29 million bpd level, the world petroleum supply and demand could be balanced if OPEC keeps output at the current level.
However, Libya might be the uncertain factor. In the north African country, labour disputes and unsatisfied militia or tribes have occupied ports and oil production facilities over the past several months. Libyan crude oil production has declined from about 1.4 million bpd to near 200,000 bpd because of such sabotage.
A resume of supply from Libya is likely to affect the global petroleum supply and demand balance significantly. On the other hand, expectation for the lifting of sanctions on Iran is an another uncertain factor. International sanctions against the Islam republic has cut the nation's crude oil output by about 1 million bpd.
The total loss from the two countries is about 2.4 million bpd, however, increased supply from Saudi Arabia and Iraq has completely filled the shortage. The current sum of crude oil production by the four countries is actually higher by about 200,000 bpd than that in early 2009.
Even a part of resumption of crude oil supply from Libya or Iran could loosen the global petroleum supply and demand balance visibly and depress the world crude oil prices.