The world’s energy markets continue to be held down by Saudi Arabia’s death march of overproduction in its bid to strip market share from competition nations and faces a host of potential geopolitical tremors that could send prices into a free-fall.
Oil prices collapsed another 2% this week as a summer time world economic slowdown take hold stripping demand for energy commodities and resulting in billowing fuel inventories despite repeated attempts by oil producers around the world to pullback production.
Market conditions for oil prices took another hit as Libya loaded an additional 600,000 barrel tanker from its Hariga port contributing to supply. The oil markets also appear to have entered a speculative cycle with bearish supply-demand conditions and glutted inventories suggesting a further retreat in oil prices, but with investors increasingly expecting a move by Saudi Arabia to stop the pain.
Saudi Arabia threw the world’s energy markets into a supply-demand dislocation when they increased their oil production to 10.5 million barrels of oil per day (mbd) and then, as the global economy showed signs of headwinds it further increased production to 11.5 mb/d with calls by the Crown Prince to increase production to 12.5 mb/d.
Although the Saudi overproduction is largely priced into the world’s oil markets and some price recovery has been witnessed with US shale oil producers forced into bankruptcy during the setback further decreasing supply-side strain, the world’s economy faces increasing geopolitical headwinds in the wake of Brexit, terrorism and instability across the European continent, and the emergence of Donald Trump in the US presidential election who has called for a scale-back in US free trade activity.
A further diminution in oil prices threatens to spark growing conflict around the world with oil dependent states that lack sufficient access to credit markets like Libya, Algeria, and Venezuela at risk of a full-blown meltdown economically and politically. Source : SPUTNIK Zhejiang Pipe Industry Co., Limited (www.wilsonpipeline.com)
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