Research and Markets: Changing Market Dynamics and the near Term Outlook for Oil Prices: Whither Geopolitics?

October 30, 2009 6:12 AM EDT

DUBLIN--(BUSINESS WIRE)-- Research and Markets (http://www.researchandmarkets.com/research/dc1011/changing_market_dy) has announced the addition of the "Changing Market Dynamics and the Near Term Outlook for Oil Prices: Whither Geopolitics?" report to their offering.

This Position Paper examines various explanations for the high, volatile prices witnessed through 2008, and for what is currently driving prices. We argue that in the preceding 5 years production failed to keep pace with demand (spurred by non-OECD economic growth). This tightened OPEC's capacity cushion, amplifying the effect of otherwise-minor geopolitical disruptions to supply.

Scope

    --  An overview of global oil market dynamics through the last 5 years;
        supply, demand, regional variations and historical context
    --  An explanation for the spike in oil prices through 2008, examining the
        relative impacts of economic growth, capacity constraints, and
        speculation
    --  An analysis of current oil price dynamics and likely direction in the
        near term

Highlights of this title

    --  The relative decline in non-OPEC oil production (mainly from Russia) and
        tight capacity margins in Saudi Arabia - OPEC's key swing state -
        amplified otherwise insignificant external factors, resulting in higher,
        more volatile price patterns.
    --  The present return to oil prices between US$65 - US$75/Bbl has been
        driven partly by a return to growth in Asia and a slowing rate of
        decline in Europe. However, the recovery should at this stage be seen as
        a financial recovery only, so the rebound does not truly reflect genuine
        fundamentals
    --  As Saudi Arabia's massive Khurais field comes on stream OPEC's capacity
        cushion will widen to comfortable levels again. This will allow the
        swing producer to vary output according to changes in non-OPEC supply.
        Thus although the recession was responsible for the collapse in oil,
        OPEC's increased capacity will keep prices low beyond the near term

Key reasons to purchase this title

    --  Understand global oil price dynamics over the past 5 years and formulate
        your own position on the causes of the price spike in 2008
    --  Determine the underlying factors currently driving oil prices and the
        relative weight of these factors against one another
    --  Understand what will shape the price of oil in the near term and beyond

ANALYSIS

    --  The high oil prices witnessed in 2008 were the result of the OPEC
        capacity cushion reaching historically tight levels
    --  By any measure, price movements between 2007 - 2008 qualify as one of
        the biggest oil price shocks in history
    --  In the past, price shocks have arisen as a result of supply disruptions
    --  There were no major supply shocks between 2005 - 2008; rather, output
        stagnated whilst demand continued to grow
    --  Demand is a function of income - not price; as countries became richer,
        they consumed more oil thereby increasing demand
    --  The growth in oil demand is a function of spectacular economic growth
        across the world but especially in China, India, Brazil and partly
        Russia
    --  Much of the new demand came from China which nearly doubled its share of
        global oil consumption between 2000 - 2008, encouraged by subsidy
    --  Global output stagnated because certain fields' production went into
        decline but Saudi Arabia - OPEC's swing producer - did not increase
        supply commensurately
    --  The practical upshot of increased global demand alongside static output
        from Saudi Arabia was a gradual erosion of the OPEC capacity cushion
    --  Non-OPEC supply growth had come from the Russian Federation but
        under-investment in pipelines and E&P began to make itself felt in 2005
    --  In addition to demand and supply fundamentals, financial markets also
        exaggerated oil price movements although it is hard to quantify the
        impact
    --  The tight capacity margin amplified otherwise insignificant external
        factors, resulting in higher, more volatile price patterns
    --  How can we explain the sudden return to high prices in 2009?
    --  Oil prices in 2009 have been erratic and volatile, and are already up to
        $70/bbl despite the still-fragile state of the global economy
    --  Buoyancy in oil futures can be partly explained by slowing rates of
        economic decline in the West, and an astonishing return to growth in
        Asia
    --  Others point to fundamentals remaining tight; strong long term growth in
        China & India against a backdrop of hard-to-retrieve supplies
    --  Khurais will massively increase OPEC's spare capacity, reducing the
        impact of supply disruptions elsewhere - whither geopolitics?

For more information visit http://www.researchandmarkets.com/research/dc1011/changing_market_dy

Source: Datamonitor

    Source: Research and Markets

Stocks Mentioned

Related Entities

• OPEC

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