Andreas Economou

Head of Oil Research

Andreas Economou joined the Institute in July 2015. His research interests lie on the natural resource and energy economics with particular focus on the empirical analysis of crude oil markets, the dynamics of oil prices and OPEC behaviour. The central topic of his research focuses largely on the causes and consequences of oil price shocks using advanced econometric techniques in modelling the world oil market. Other aspects of his research focus on OPEC’s behaviour and pricing power in the oil market, the relationship between oil prices and the global economy, as well as the real-time analysis of oil price risks using forecast scenarios. Previously he was an OIES-Saudi Aramco Fellow. Andreas is currently completing his PhD in Energy Economics at UCL Energy Institute. He holds an MSc (Hons) in Oil and Gas Enterprise Management from the University of Aberdeen with specialisation in petroleum economics and the international fiscal systems analysis and a BSc in Business Administration from the University of Macedonia, Greece.

Areas of Expertise

Crude oil markets; causes and consequences of oil price shocks; oil price risks using forecast scenarios; OPEC behaviour and pricing power; oil supply and oil demand issues; applied econometrics.

Contact

Email: [email protected]

This paper analyses the oil market dynamics from the lens of the output and investment policies of the largest three global oil producers, Saudi Arabia, Russia, and the United States, and their evolving relations. The behaviors, strategies, and the relations between these three big producers have changed over the years and have been shaped by key events and shocks impacting the oil market such as the rise of US shale and the COVID-shock. The Russia-Ukraine war in 2022 represents yet another milestone in the evolution of these oil relations and the position of the three big producers in the global energy scene, with long-term implications on the dynamics of oil markets. These changes are occurring against a more complex energy scene where governments are pursuing policies to achieve the key objectives of sustainability, security, and affordability which will impact the future role of oil in the energy mix.

[post_title] => Oil Relations and the Balance of Power between the Big-3 Oil Producers: Transformations and impacts [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-relations-and-the-balance-of-power-between-the-big-3-oil-producers-transformations-and-impacts [to_ping] => [pinged] => [post_modified] => 2023-03-20 10:25:22 [post_modified_gmt] => 2023-03-20 10:25:22 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=45918 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 45895 [post_author] => 974 [post_date] => 2023-02-24 10:59:58 [post_date_gmt] => 2023-02-24 10:59:58 [post_content] => This new OIES presentation on the Short-Term Oil Market Outlook focuses on the two main swing factors that dominate the oil market outlook in 2023. First, we take a closer look on China’s oil outlook and how the recovery path of Chinese demand could evolve following the reversal of China’s zero-COVID policy and the country’s re-opening. Second, we analyse the expected impacts of EU sanctions and price cap on Russian crude and products exports and how these are expected to shape the Russian refinery runs and crude oil production profiles in 2023. Key points: - Chinese oil demand is projected to grow by 700,000 b/d this year, recording a strong rebound in H2, but more volatility in the domestic market means that a W-shaped recovery path is more likely in 2023. Uncertainty over our reference outlook for China’s oil demand growth remains confined within the 500,000 b/d and 850,000 b/d range. - A classification change for diesel could mean less product exports than initially expected while crackdowns on Shandong raise questions about the government’s priorities: cracking the whip or spurring growth? - Russian crude production is forecast to decline y/y by 530,000 b/d to 10.2 mb/d, with Russia’s crude output falling to 10 mb/d in Q2 from 10.8 mb/d in January and the disruptions as compared to pre-war Jan/Feb-22 levels averaging 850,000 b/d for the year. - Uncertainty however remains elevated, with our high case showing Russian production falling below 10 mb/d to 9.8 mb/d by April and disruptions reaching 1.2 mb/d, while our low case sees Russian production maintained above 10 mb/d and crude output disruptions averaging 650,000 b/d for the year. - Overall, we expect Russia to struggle redirecting around 50% of the total EU banned volumes of product exports, with Russian refinery runs projected to start declining from February-onwards and remaining below 5 mb/d for the remainder of the year. Russian refinery runs are forecast to average 4.9 mb/d in 2023, a y/y decline by 500,000 b/d from 5.4 mb/d in 2022. - Under our reference case we expect the market to remain relatively balanced in 2023 and register a small 300,000 b/d surplus, with the Brent price projected to average $95.7/b and the Brent prospect standing lower at $90.6/b. Uncertainty however remains elevated and risks remain tilted to the downside, albeit easing as we move further into the year. [post_title] => Short Term Oil Market Outlook: Q1 2023 [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => short-term-oil-market-outlook-q1-2023 [to_ping] => [pinged] => [post_modified] => 2023-02-24 10:59:58 [post_modified_gmt] => 2023-02-24 10:59:58 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=45895 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 45662 [post_author] => 974 [post_date] => 2023-01-17 10:41:17 [post_date_gmt] => 2023-01-17 10:41:17 [post_content] => Oil has always assumed a special position within the energy complex. Oil is a global and mature market, fungible, with many interrelated physical and financial layers, diverse set of players both on the demand and the supply side and has dealt with many shocks in the past (geopolitical and weather-related outages and demand shocks). Nevertheless, 2022 generated new types of shocks and the oil market has not been immune from government interventions which added new layers of uncertainty. However, despite the severity of the shocks experienced in 2022, the oil market through its various layers and players has shown strong resilience and continues to perform its key functions of price discovery and redirecting crude and products in the face of a massive shock. These shifts in trade flows will accelerate and consolidate in 2023, with wide implications for the structure of the market, price discovery, geopolitical relations, and the dominance of the dollar in oil trade. However, this has come at a cost. The trade routes have become longer and the cost of re-optimizing trade flows has increased, the adjustment in price differentials is sharper, the markets have become more segmented and less transparent and new class of trading entities have emerged. Also, refineries are having to change their crude slates resulting at times in sub-optimal use of crudes and supply of products. Most importantly, the current crisis is causing increased government intervention in energy markets including oil markets as energy security, alongside reducing emissions, becomes a key driver of energy policy. These government interventions have not yet reached their peak and are unlikely to be reversed anytime soon and the full impacts of which will become more visible in 2023 and beyond. [post_title] => Oil Markets in 2023: The Year of the Aftershocks [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-markets-in-2023-the-year-of-the-aftershocks [to_ping] => [pinged] => [post_modified] => 2023-01-17 10:41:17 [post_modified_gmt] => 2023-01-17 10:41:17 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=45662 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 45340 [post_author] => 111 [post_date] => 2022-10-18 12:12:02 [post_date_gmt] => 2022-10-18 11:12:02 [post_content] => New OIES presentation – Short-Term Oil Market Outlook: Prospects, Risks and Uncertainty. Key points:

The market is torn between a bullish micro-oil story and a bearish macro story. This is exacerbated by potential government intervention (price caps, embargoes, talks of restrictions of US products exports) and macroeconomic measures (aggressive tightening of monetary policy). Volatility also reflects tightness in some segments of the market particularly in the refining sector and the low levels of middle distillates stocks.
The key elements of the bullish micro-oil story are based on expectations of larger Russian crude and products disruptions; end of crude stock releases from SPR; OPEC+ role in balancing the market; moderate non-OPEC supply growth due to underinvestment; geopolitical risks outside Russia; and limited buffers in the system to deal with outages.
The bearish macro story is based on fears of a global economic recession with big negative impacts on oil demand and with no signs that China will alter its zero COVID-policy anytime soon; and some micro-oil factors such as expectation of limited Russian supply disruption, continued release of stocks from SPR, high US shale response, and until recently potential full return of Iran oil supplies.
Prospect of Russian supply disruption is a key factor shaping market expectations and the bullish story. So far, disruption of Russian crude production has been limited and well below initial expectations at the start of the Russia-Ukraine war. Despite this limited disruption, there has been massive transformation in global crude and products trade flows.
Products markets are tight and diesel stocks in Europe are below the 5-year average. The decline in Russian products exports to Europe; the loss in refining capacity in some parts of the world; maintenance and the strikes that paralyzed French refining sector are all factors contributing to this tightening and to the sharp swings in diesel margins. A key question is whether China’s refineries will increase its exports of products and ease the pressure on diesel markets after China has set its latest batch of oil products export quotas for 2022.
Another key factor shaping expectations is the downgrading of global growth prospects and the potential impact on oil demand. Global oil demand growth is now forecast at 1.8 mb/d in 2022 and 1.7 mb/d in 2023.
On implied balances, the market has shifted from deficit to surplus in Q3 2022. Weaker demand growth, limited supply disruption, and robust supply particularly from key OPEC countries alongside release of crude from the SPR all contributed to this shift.
Reference forecast for Brent stands at $100.8 in 2022 and $94/b in 2023, but the balance of risks in 2023 is skewed on the downside dominated by negative demand pressures (-$6/b on annual terms) and the price band ranges between $77.8/b and $104.3/b.

[post_title] => Short-Term Oil Market Outlook: Prospects, Risks and Uncertainty [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => short-term-oil-market-outlook-prospects-risks-and-uncertainty [to_ping] => [pinged] => [post_modified] => 2022-10-18 12:12:02 [post_modified_gmt] => 2022-10-18 11:12:02 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=45340 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [5] => WP_Post Object ( [ID] => 45147 [post_author] => 111 [post_date] => 2022-08-08 11:20:40 [post_date_gmt] => 2022-08-08 10:20:40 [post_content] => Russia’s invasion of Ukraine continues to strongly impact international energy markets, posing severe challenges for energy importing countries. Much of the commentary and analysis has been focused on the consequences for, and reactions of, European nations and the European Union. Despite the fact that each region has its own specific dynamics, the global nature of energy markets means that the effects of the conflict in Ukraine are felt around the world, and Asia is no exception. Most countries in Asia are net importers of fossil energy. International prices of crude oil and LNG were already rising in the later months of 2021, but the war in Ukraine accentuated this rise. While Asian buyers have been picking up discounted cargoes of oil and coal, there have been new costs and complications as energy, food, and other supply chain flows are adapting to sanctions. The immediate impact of these high energy prices and supply chain disruptions is seen in rising costs across many sectors – whose supply chains were barely recovering from the COVID-19 pandemic. The disruption of grain supplies from Ukraine and Russia has had particularly severe consequences for food prices, posing serious challenges for governments and peoples. Not only could this distract from the need to address climate change, but the growing frequency of extreme weather events may accentuate existing poverty and inequality. These phenomena provide the context within which this commentary examines the impacts of Russia’s invasion of Ukraine on Asian energy markets, focusing on the direct exposure of Asian countries to Russian energy exports, as well as on the direct and indirect impacts of the short-term price increases. [post_title] => Asian Energy Markets Following the Russian Invasion of Ukraine [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => asian-energy-markets-following-the-russian-invasion-of-ukraine [to_ping] => [pinged] => [post_modified] => 2022-08-10 11:52:21 [post_modified_gmt] => 2022-08-10 10:52:21 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=45147 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [6] => WP_Post Object ( [ID] => 45137 [post_author] => 111 [post_date] => 2022-08-04 11:52:51 [post_date_gmt] => 2022-08-04 10:52:51 [post_content] => Volatility has been the name of the game in oil markets where we have recently seen some very sharp movements in oil prices and spreads. This reflects the high degree of uncertainty surrounding the oil market both on the supply and the demand side, but also lower liquidity which is amplifying some of these price movements. And these are reflected in two contrasting narratives: The super bullish scenarios which are projecting sharp acceleration in prices and focusing on the supply side of the market and the super bearish scenarios which are projecting a sharp decline in the oil price and focusing on the demand side and recessionary fears. This new OIES presentation empirically assesses these two narratives via forecast scenarios that attempt to stress test the upside and downside extremes of the short-term price outlook to 2023. On the upside, the main elements of the bullish narrative are supply-driven in terms of Russian disruptions accelerating again in H2 2022 and persisting in 2023, some OPEC+ producers continuing to struggle returning production, geopolitical risks outside Russia persisting and Iranian production failing to return in 2022 and 2023, and non-OPEC growth continuing to undershoot expectations. From a demand perspective, gas-to-oil switching amid winter gas shortages and a stronger comeback of Chinese demand dictate the bullish narrative. Analysis shows that even if all these bullish factors converge together to generate a perfect bullish storm, oil prices are not expected to exceed $140/b and they cannot be sustained in a strong price environment of $130s for more than two quarters due to strong negative responses from the demand-side. For prices to persist on an upward momentum, the eventual realization of the Russian disruption needs to be large, and one needs to make the unrealistic assumption that high prices due to the supply shock don’t have a substantial impact on demand. On the downside, the main elements of the bearish narrative are demand-driven in the face of recession concerns amid persistent supply-chain disruptions and high inflationary pressures squeezing global growth. Bearish supply-driven pressures are also present in terms of a lower realization of Russian disruptions, a potential breakthrough in the Iran nuclear negotiations and the full returning of Iranian production, modest improvements in the non-OPEC outlook and an extension of the SPR releases to year-end. Under a perfect storm of negative drivers, our modelled projections suggest that oil prices could fall in the $70s, but this will require all the negative demand and supply forces to converge together in a perfect storm including the Russian supply shock to be resolved and ignoring the impact of the low-capacity buffers in the oil system. This sets the price floor higher by between $5-$10/b in the $75/b and $85/b range. Our reference outlook suggests that the oil market volatility will remain elevated and the eventual realization of the oil market will likely turn out to be somewhere between these two extreme scenarios as there are many moving parts shaping the market and not all of these moving parts can move in the same direction for long. Eventually as the dominant elements become clearer (i.e. the impact of sanctions on Russian production, macro-outlook and demand impacts), price volatility will start to ease and move away from the recent extremes. [post_title] => Oil market volatility: Assessing the bullish and bearish narratives [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-market-volatility-assessing-the-bullish-and-bearish-narratives [to_ping] => [pinged] => [post_modified] => 2022-08-04 11:52:51 [post_modified_gmt] => 2022-08-04 10:52:51 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=45137 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [7] => WP_Post Object ( [ID] => 44973 [post_author] => 111 [post_date] => 2022-06-10 11:31:21 [post_date_gmt] => 2022-06-10 10:31:21 [post_content] => This new OIES presentation assesses the implications of the tightening sanctions on Russian oil for crude and product markets, as well as the short-term oil market outlook in terms of supply/demand and price dynamics. Some key points:

The immediate restrictions on Russian crude and products flows remain driven by self- sanctioning. But the EU’s recently agreed year-end embargo on Russian oil and prohibition of EU operators from insuring and financing the transport of Russian oil to third-party countries are bound to change this, albeit the full impact of the latest sanctions on Russian oil flows may not be felt until 2023.
The redirection of Russian crude to Asia and the Med, the EU intake holding steady at 2.1 mb/d in March/May following an initial m/m drop by 0.48 mb/d, and lower refinery output amid a slowdown in domestic demand have led to Russian crude exports jumping to 2019 high levels at 5.4 mb/d from 4.8 mb/d in February.
Russian crude-on-water has risen to record levels led by Urals, as crude exports shifted from short-haul to long-haul. Helping this redirection of trade flows has been the offer of Russian Urals at a large discount and easier payment conditions with India imports of Russian crude already nearing 1 mb/d, China’s appetite growing towards H2 as lockdowns ease and the Med steadily ramping up intake of discounted Urals (mainly Italy and Turkey). In response, US and West African Crude (WAF) crude is now shifting from Asia to Europe to fill the supply gap of Russian barrels, while intake from regional domestic producers is also on the rise. This is changing dramatically European refineries’ diet.
The EU ban on Russian products adds to the pressure in Europe as distillate stocks remain tight. Russian diesel continues to flow to Europe with markets pricing non-Russian diesel at a premium. Also, the definition of what constitutes non-Russian cargoes has become stricter with more rigorous restrictions on suppliers on the origin of their products.
European product markets saw some relief by hiking imports from the US, the Middle East and India, but the products market in the US is also tight due to the refinery closures in 2020/2021 and shortages of key feedstock from Russia due to sanctions. Asia markets are also becoming increasingly tight as regional demand picks up amid export quotas in China and refiners in India are at, or near, maximum capacity. The products market tightness that started, even before Russia’s invasion of Ukraine, is spreading to other products from diesel to jet to gasoline.
The supply disruption in Russian supplies remains limited so far and for now we expect crude shut-ins in H2 to reach between 1.5 mb/d and 2.6 mb/d towards year-end with our reference case favouring the high disruption scenario. The risk of bigger disruption is rising by the day due to self-sanctioning, the European ban on Russian seaborne imports, EU operators prohibited from insuring and financing transport of Russian oil (including reinsurance), refusal of many banks to finance Russian-related commodity transactions, and traders not renewing term contracts with Russian producers.
Global supplies find little comfort as most OPEC+ struggle to meet their quotas, the prospects of reaching an Iran nuclear deal have diminished, US shale growth remains constrained by surging inflation and supply-chain bottlenecks and companies sticking with plans to keep capital spending in check. In the near-term, the crude market could find relief from the continued SPR releases, but this will be temporary.
On the demand side, China’s post-lockdown recovery and pent-up demand in advanced economies support the near-term outlook, but risks are tilted to the downside and the risk of demand responses to higher oil prices and slower economic growth increases in 2023. Our global demand forecast sees y/y growth of 2.2 mb/d in 2022 and 1.4 mb/d in 2023, albeit growth outcome in Q3 will be critical to the outlook.
The oil market is still seen at a small surplus in 2022 at 0.38 mb/d but market deficits are expected to re-emerge sooner from Q4-onwards deepening the overall deficit in 2023 to -0.58 mb/d. OECD stocks remain under severe pressure throughout the remainder of the year, before the draws reverse ending-2022 with the deficit easing only slightly in 2023. Our reference Brent forecast stands at $112.8/b in 2022 and $102.8/b in 2023, with the price pressures sustained in Q2 and Q3 before easing towards next year. Oil price volatility remains high throughout, but the balance of risks is tilted to the downside in 2023.

[post_title] => Russia’s invasion of Ukraine and oil market dynamics [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => russias-invasion-of-ukraine-and-oil-market-dynamics [to_ping] => [pinged] => [post_modified] => 2022-06-10 13:28:42 [post_modified_gmt] => 2022-06-10 12:28:42 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=44973 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [8] => WP_Post Object ( [ID] => 44871 [post_author] => 111 [post_date] => 2022-05-06 10:59:30 [post_date_gmt] => 2022-05-06 09:59:30 [post_content] =>

This new OIES presentation features our initial empirical assessment of the implications of the proposed EU ban on Russian oil for supply/demand and price dynamics to 2023.
- Although the degree of uncertainty surrounding the actual size of Russian supply disruptions remains high, March 2022 data show a very small m/m disruption of less than 1% in Russian oil production with our preliminary assessment for April suggesting that disruptions could have risen m/m by 0.5 to 0.9 mb/d with Russian crude output falling between 10 mb/d and 10.5 mb/d from 11 mb/d in March.
- The disruptions in Russian oil appear to intensify in April mainly due to storage constraints as domestic demand fell and demand for product exports declined. In March, we estimate that Russia’s products demand declined sharply m/m by 11% to 2.8 mb/d, a fall by 0.35 mb/d y/y. At the same time, Russian product exports fell m/m by 25% with Europe and the Americas accounting for the entire decline (-0.8 mb/d m/m). As a result, Russian refiners cut runs by nearly 11% m/m in March with the output of all products being impacted and preliminary estimates suggest that runs dropped further in April to 15%.
- Russia has been able to redirect some of the decline in oil exports to Europe to other parts of the world with intake from Asia easing the fallout of Russian crude, but product exports have been more difficult to clear. In effect, however, as Russian crude flows are shifting from short- to long-haul it will become increasingly more difficult to clear Russian barrels as time goes by and the impact on Russian crude will be more severe. This is emphatically depicted on Russian crude-on-water that has nearly doubled since the start of the year up by more than 45 per cent reaching to high levels comparable to May 2020 and a rise in floating storage expected to follow suit.
- The EU-27 proposal on May 4, 2022, to phase out Russia seaborne and pipeline crude imports within 6 months and gradually ban the imports of refined products by year-end has huge implications both for Russian oil but also the global oil markets. In March, EU-27 imports of Russian crude totaled 2.7 mb/d, of which 1.9 mb/d were seaborne and 0.8 mb/d were imported via pipeline, and refined product imports 1.4 mb/d bringing the total (crude and products) EU-27 ban of Russian oil close to 4.1 mb/d. And while it will be challenging to ban all of Russian oil with some landlocked countries that rely heavily on Russian pipeline crude already discussing exceptions (but not opposing the EU ban) and considerable uncertainty remaining about the actual timing of phasing out Russian oil, we assume some 85 per cent of the total EU-27 imports of Russian oil in March (~ 3.5 mb/d) to be halted by year-end.
- In our Reference case in which the EU-27 ban is excluded, Russia’s crude disruptions mainly due to self-sanctioning reach 1.3 mb/d in May 2022 before gradually rising to 1.9 mb/d ending-2022, around which level they are maintained in 2023. The impacts on oil prices would have been small and the supply gap could be filled considering the supply/demand responses already in effect and the SPR releases. Our Reference case sees the Brent price averaging $105.4/b in 2022 and $99.2/b in 2023, with the supply/demand gap holding near balance in both years.
- But in our Escalation case in which the disruptions in Russian oil under the EU-27 ban exceed 4 mb/d by August to average at 3.5 mb/d for 2022 as a whole, the impacts are more profound both on price and market dynamics as it is more difficult to fill the supply gap. The SPR releases are expected to ease the near-term pressures, but beyond the near-term some 1.1 mb/d of lost Russian supplies remain uncovered on OPEC+ constraints, the dimmed potential of Iran’s return in 2022 and the capacity constraints outside OPEC+.
- In response, global oil demand will take a larger hit and y/y growth expected to fall to 1.8 mb/d in 2022 and 0.5 mb/d in 2023, with OECD accounting for 67% (or 1 mb/d) and non-OECD for 33% (or 0.5 mb/d) of the expected losses in total growth by 2023 relative to our Reference case. Fuel demand for industry appears the worst hit accounting for 40% of total demand losses, with massive downgrades seen in diesel and gasoline demand in OECD alone and a combined 1 mb/d of diesel/gasoline demand at risk by 2023.
- Brent prices in the Escalation case average at $128.2/b in 2022 and $125.4/b in 2023, $22.8/b and $26.3/b higher than our Reference respectively, climbing at $150/b by July 2022 before easing in the $110s in H2 2023. Market deficits are seen re-emerging from H2 2022 onwards and averaging -0.1 mb/d in 2022 and -0.4 mb/d in 2023. With the market failing to build a material surplus after Q2 2022, severe pressure is maintained to the exceptionally tight OECD stocks and in response to market prices.
- Overall, oil price volatility remains extremely high in both 2022 and 2023 as the outlook is now more than ever sensitive to policy decisions, with Brent ranging between $101.4/b and $130.8/b in 2022 and $85/b and $131.9/b in 2023. This is also reflected in global balance risks, with the supply/demand gap ranging between -0.7 mb/d and 0.8 mb/d in 2022 and -1.8 mb/d and 0.7 mb/d in 2023, favouring more tight markets in both years.

[post_title] => Implication of the proposed EU ban of Russian oil for global oil markets [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => implication-of-the-proposed-eu-ban-of-russian-oil-for-global-oil-markets [to_ping] => [pinged] => [post_modified] => 2022-05-07 09:47:45 [post_modified_gmt] => 2022-05-07 08:47:45 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=44871 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [9] => WP_Post Object ( [ID] => 44752 [post_author] => 111 [post_date] => 2022-04-04 11:56:36 [post_date_gmt] => 2022-04-04 10:56:36 [post_content] => This new OIES presentation features a comprehensive empirical assessment of the implications of the Ukraine war on oil price and supply/demand dynamics via a number of forecast scenarios examining the size of disruption in Russian supplies, OPEC and non-OPEC supply response, the impact of the latest US announcement of SPR release and other uncertainty scenarios. The analysis considers two principal scenarios: - A Reference case in which self-sanctioning measures and obstacles in redirecting Russian crude flows due to financing and shipping constraints results in a loss of 1.1 mb/d of Russian crude output by May 2022 that persists throughout our forecast horizon. - A Full curtailment case either due to an extension of direct sanctions on Russia or a retaliatory tit-for-tat oil embargo from Russia that results in the loss of 3.9 mb/d of Russian oil production by May 2022 that also persists throughout our forecast horizon. Both scenarios are presented against a no-disruption baseline that corresponds to the latest forecast prior Russia’s invasion of Ukraine to assess the impact of the negative effects of Russia’s disruptions on price and supply/demand dynamics. Under both principal scenarios the near-term price pressure is maintained till year-end on the lack of immediate replacement barrels to fill any potential gap from Russia’s disrupted supplies until at least H2 2022, before prices retreat towards $100/b in 2023 as negative demand responses on higher energy prices and wider macro disruptions begin to dictate the outlook. In the more severe disruption case, oil prices momentarily rise in the $150s, $31/b higher than the price peak of $125/b under our Reference case. Overall, depending on the size of disruption in Russian supplies and supply/demand outcomes in response, Brent price ranges between $95/b and $140/b in 2022 on annual basis and $74/b and $123/b in 2023. Global oil demand loses between 1.1 mb/d and 2.5 mb/d of growth by 2023, with the y/y growth averaging 2.6 mb/d in 2022 and 1.5 mb/d in 2023 under Reference and 2.2 mb/d and 0.5 mb/d in 2023 under the Full curtailment case. OECD demand takes the hardest hit. The impact on non-OECD demand is more profound under the Full curtailment case. In terms of sectors the impact on fuel demand for industry appears the most affected. Our latest analysis sees the first detailed assessment of the impacts on OECD products demand, in which middle distillates and gasoline see massive revisions with their combined disruption under the more severe case reaching 1.2 mb/d. On the supply side, a collective supply response could bring in total 3 mb/d of additional supplies ending 2022, suggesting that the market can manage a small to medium size disruption in Russian supplies, albeit near-term pressures particularly in H1 persist in both scenarios. On the contrary, a severe curtailment of Russian supplies would see the price pressure persisting for most of 2022, with replacement barrels struggling to fill any gap larger than 4 mb/d even in 2023. The US SPR release could offset some of this pressure in the near-term, but the impact on prices appears to be shortlived and largely dependent on the size of the Russian supply disruption. The balance of risks to the global supply/demand balance points towards tight market conditions in 2022 with the prospect of a more balanced market and surpluses reappearing in 2023. Our best-case scenario under the Reference sees the market only balanced in 2022 by 0.15 mb/d and a small surplus of 0.63 mb/d building in 2023, offering some relief to OECD stocks that draw massively for most of 2022. The more severe case under Full curtailment however sees the market deficits persisting in 2022 and averaging -1.1 mb/d for the year, before the market balances in 2023 to 0.05 mb/d. In this scenario, OECD stocks draw massively to multiyear low levels. [post_title] => Russia’s invasion of Ukraine and global oil market scenarios [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => russias-invasion-of-ukraine-and-global-oil-market-scenarios [to_ping] => [pinged] => [post_modified] => 2022-04-04 11:56:36 [post_modified_gmt] => 2022-04-04 10:56:36 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=44752 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [10] => WP_Post Object ( [ID] => 44604 [post_author] => 111 [post_date] => 2022-03-02 16:58:55 [post_date_gmt] => 2022-03-02 16:58:55 [post_content] =>

After weeks of tensions, Russian President Vladimir Putin ordered Russian troops to invade Ukraine, prompting an international sanctions response targeting Russia’s economy but not directly its oil supplies or energy payments. But as sanctions on Russia intensified and as financial institutions started to refuse financing Russia-related transactions, including opening letters of credit or clearing payments and as some companies became reluctant to purchase Russian crude, Brent on March 2 (the time of writing) was trading above $110 for the first time since 2014.

Looking forward the market focus should not only be on whether the oil sector will be directly targeted by sanctions, but also the crescendo effect of self-sanctioning along the oil supply chain all the way from marketing to financing to shipping. Fears over energy sanctions and the ambiguity over the banking sanctions have already seen companies avoid purchasing Russian barrels, pushing prices to new multiyear highs and shaving-off shock mitigation policies such as the SPR releases. Also, it has become clear that traders holding Russian crude on their books are struggling to clear cargoes and this has been reflected in widening differentials and rising shipping and insurance costs.

The next stages for Russian crude supplies are highly uncertain but some possible impacts include:

- Massive shifts in trade flows and sharp adjustments in price differentials to reflect shifts in Russian crude exports. Particularly, there could be a greater re-redirection of flows from Europe to Asia, but there are limits to such re-direction and not all Urals previously destined to Europe will flow into Asia.

- Russian oil companies could offer sweeteners to buyers to make their barrels more attractive, for instance shifting cargoes from FOB to CFR basis. Also, in response to more extensive self-sanctioning, Urals and ESPO could be offered at discounts so large that cargoes would eventually clear, potentially as masked cargoes or via ship-to-ship transfers. But there are limits to this strategy given the large volumes of Russian exports and the intensification and widening of sanctions.

- Self-sanctioning escalates over the coming weeks leading to a reduction in Russian production and supply disruptions at a larger scale.

In the current environment of ever rising tensions, one should also not also exclude the possibility that in an escalation situation where Russia struggles to clear its barrels, weaponizing energy becomes the next chapter in Russia’s ongoing standoff with the West. As these are still early days, a scenario in which Russian oil supplies get disrupted in a sudden manner should also be considered. This will exert significant pressure on both market balances and prices in the near-term and for most of 2022. In the short term, potential responses to ease the price pressure are likely to come from the supply side. The current plan of OPEC+ to return withheld supplies back to market, Iran fully returning to the market and non-OPEC production growth particularly in North America accelerating, these combined supply responses can help fill any potential supply gap. The planned SPR releases will offer little support to a potential shortfall. But in such scenario the demand responses will also play their role and become more visible beyond the near-term. In terms of products, the market and refiners appear less flexible faced with constraints both in terms of costs and feedstock availability. Also, the impacts of the current shock will extend beyond the short-term and beyond balances and prices. The recent crisis will elevate energy security (including oil security) in policy makers’ agenda with long-term consequences for governments’ energy policies including their energy transition.

[post_title] => Russia-Ukraine crisis: Implications for global oil markets [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => russia-ukraine-crisis-implications-for-global-oil-markets [to_ping] => [pinged] => [post_modified] => 2022-03-02 16:58:55 [post_modified_gmt] => 2022-03-02 16:58:55 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=44604 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [11] => WP_Post Object ( [ID] => 43902 [post_author] => 111 [post_date] => 2021-07-28 10:44:13 [post_date_gmt] => 2021-07-28 09:44:13 [post_content] => This new OIES presentation looks at the extension of the OPEC+ deal to the end of 2022 and implications on oil markets:

Global oil demand has lost some momentum recently, but the fundamentals remain solid where demand is still expected to grow by 5.6 mb/d in 2021 and further 3.3 mb/d in 2022.
OPEC+ to unwind the 5.76 mb/d cut by September 2022. OPEC+ producers agreed to ease their output cuts by 2 mb/d between August and December 2021, adding 400 kb/d each month over this period. If the monthly 400 kb/d reductions per month carry on until April 2022, OPEC+ will add 3.6 mb/d to the market. OPEC+ aims to release the remaining 2.16 mb/d in monthly increments of 432 kb/d between May 2022 and September 2022.
Extension of the agreement until end of 2022 implies there is a buffer of up to 3 months in which OPEC+ may decide not to release the 400,000 b/d increment or increase cut by up to 400 kb/d.
The baseline adjustment does not affect the monthly increments and OPEC+ total production; it impacts how the monthly increment is distributed among member countries.
Assuming all the remaining barrels are released back to the market by September 2022, OPEC+ production can exceed 42 mb/d but the projected additional barrels released from OPEC+ back to the market in 2022 are likely to be less than the headline 5.76 mb/d figure.
Considering implied production capacity and maximum historical production levels sustained over a period of 3-6 months we estimate that OPEC+ producers can return only 4.4 mb/d of restrained supplies 1.2 mb/d below target.
With the supply path for OPEC+ clear the balance of risks to our price outlook is now limited to demand and geopolitical risks.
Despite the increase in production between August 2021 and December 2021 the market is projected to remain in deficit in Q3 and Q4 2021 and for the year as a whole.
Depending on global oil demand outcomes and the return of Iranian barrels, the market could switch into surplus in 2022 if OPEC+ stick to their deal showing the importance of OPEC+ balancing role in a uncertain environment.

[post_title] => OPEC+ and Short-Term Oil Market Dynamics [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => opec-and-short-term-oil-market-dynamics [to_ping] => [pinged] => [post_modified] => 2021-07-28 10:44:13 [post_modified_gmt] => 2021-07-28 09:44:13 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=43902 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [12] => WP_Post Object ( [ID] => 43740 [post_author] => 111 [post_date] => 2021-05-25 10:49:13 [post_date_gmt] => 2021-05-25 09:49:13 [post_content] => This paper provides a historical perspective from 1990 to 2018 of the functioning of the world oil market with and without OPEC. Analysis builds on a new methodology simulating counterfactual (i.e. what-if) outcomes in the rich context of state-of-the-art structural VAR models of the world oil market to empirically assess OPEC's contribution to oil markets and the global economy by quantifying the impact of OPEC's balancing role via its spare capacity cushion on the historical evolution of oil production, oil prices and price volatility, the joint evolution of the supply and demand elasticities and global welfare. A counterfactual scenario is constructed of how global oil production would have evolved if OPEC had been producing at maximum capacity, held no spare capacity and did not play any balancing role since 1990. The analysis also employs a general equilibrium approach to determine the global welfare implications of a world without OPEC spare capacity across oil-exporting and oil-importing regions. The welfare effects are calculated based on regional GDP gains and losses following changes in oil production patterns globally. The methodology to determine the impact on GDP is based on a computable general equilibrium (CGE) framework which offers a high level of detail regarding the world economy in terms of economic sectors and regional interdependencies. Andreas Economou, Bassam Fattouh, OPEC at 60: the world with and without OPEC’, OPEC Energy Review [post_title] => OPEC at 60: the world with and without OPEC [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => opec-at-60-the-world-with-and-without-opec-2 [to_ping] => [pinged] => [post_modified] => 2021-05-25 10:49:13 [post_modified_gmt] => 2021-05-25 09:49:13 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=43740 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [13] => WP_Post Object ( [ID] => 43226 [post_author] => 111 [post_date] => 2020-12-07 12:24:35 [post_date_gmt] => 2020-12-07 12:24:35 [post_content] => In almost every oil cycle, the market is confronted with the problem of ‘missing barrels’, the gap between the change in inventory implied by global supply-demand balances on the one hand and the observed change in inventory levels by commercial and government entities (adjusted for floating storage and oil in transit) on the other hand. Based on IEA global oil balances, the surplus in the first half of 2020 reaching a record level of 7.6 mb/d. Out of the total stockbuild in the first half of the year, total OECD stocks accounted for 344.3 mbbls or 25% of the total increase, floating storage and oil in transit accounted for 105.3 mbbls or 8% of the total increase and the remaining 940.4 mbbls or 68% of the total increase to balance is essentially unaccounted for including changes in non-reported stocks in OECD and non-OECD areas. The volume of missing barrels in H1 2020, is the largest ever recorded gap between observed and implied stocks since at least 1990, being three times larger than previous historical downcycles such as in H1 1998 and more recently the H2 2018 downturn and nearly 10 times larger than the imbalance of H2 2008 in the aftermath of the global financial crisis. The issue of missing barrels is not incidental. Given the severity of the oil shock in 2020, the focus has been on supply-demand balances. But once the dust settles, the focus will shift to the size of available stocks and OPEC+ efforts in drawing down these stocks to ‘reasonable’ levels. If the missing barrels are ‘artificial’, the result of imprecise measuring of supply and demand, then the buffers in the system are thinner than currently estimated and OPEC+ task in reducing stocks is less of a challenge. If the missing barrels are ‘real’, then most of these barrels are to be found in non-OECD particularly in China given its large storage capacity. This may reveal the fact that while Chinese demand has been strong, the country’s high level of imports reflects mainly stockpiling and stocks are already at an elevated level and thus crude import flows may ease representing a bearish factor. We argue that large accumulation of barrels has occurred in China which suggests that ‘artificial’ or ‘imaginary’ barrels, as a result of imprecise measurement of global oil supply-demand balances, are not the only explanation to the missing barrels question. Indeed, even though China’s crude balances are riddled with inconsistencies, the country has amassed large volumes of crude this year which have contributed both to the country’s strategic reserves and commercial forward cover. At the same time, Chinese demand may well be underestimated given refiners’ tax avoidance practices. The complexities of global crude balances highlight the ongoing challenges facing OPEC+ in estimating how long it will take to rebalance the market. Going forward, can OPEC+ afford ignoring non-OECD stocks? But if these stocks are being stored for strategic purposes and the bulk of these stocks will not be released back into the market, does targeting non-OECD stocks really matter for oil policy purposes? Should we exclude years of elevated stocks from the averages or have these become main features of the new cycles and the adjustment process? As we go into 2021, these questions will become more pressing. [post_title] => The COVID-19 Shock and the Curious Case of Missing Barrels [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => the-covid-19-shock-and-the-curious-case-of-missing-barrels [to_ping] => [pinged] => [post_modified] => 2020-12-07 12:24:35 [post_modified_gmt] => 2020-12-07 12:24:35 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=43226 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [14] => WP_Post Object ( [ID] => 42716 [post_author] => 111 [post_date] => 2020-11-16 11:30:53 [post_date_gmt] => 2020-11-16 11:30:53 [post_content] =>

While the market is shifting its attention to OPEC+ dynamics and the return of Libyan and Iranian barrels, the reality remains that this is first and foremost a demand shock and ultimately the evolution of demand will be the key factor shaping oil market outcomes. This demand shock is special in many ways compared to previous shocks: in addition to its size and the speed at which global oil demand contracted, its impact has been highly uneven across geographies (Asia versus the rest of the world) and across fuels (jet fuel and distillate demand versus other parts of the barrel). This has created a challenge for refineries and their margins have been under severe pressure. The combination of OPEC+ cuts and the return of Libyan barrels have created unevenness in terms of crude quality, with light sweet crudes in abundant supply compared to heavy-medium and sour crudes. The size of the shock and the unevenness of its impacts imply a recovery process which is far from smooth.

As the OPEC+ meeting approaches, all eyes are on the Group’s next move. The main choices facing OPEC+ are taper the cut as planned, extend the current cut (and its duration) by deferring the taper, or deepen the cut. Ultimately, the effectiveness of the OPEC+ response will be shaped by demand conditions. Our results show that by extending the current cut for 3 months under reference growth, OPEC+ will be able to keep oil prices well supported in the $40/b-$45/b price range in H1 2021, lifting the Brent price by nearly $4/b on average compared to our base case of no extension and by $2/b for 2021 overall. What is interesting is that in both scenarios (tapering the cut or extending the cut for 3 months), market deficits persist throughout our outlook (barring a rapid deterioration in global oil demand including Asian oil demand). A shift in expectations of improved fundamentals in the second half of 2021 following the positive news on the vaccine may render the option of withholding barrels today and releasing them when the better times arrive attractive. If demand recovers quicker than expected due to the wide availability of an effective vaccine, the oil price is projected to increase moderately up to $4/b annually under the extension scenario as any rally will still be capped by existing buffers of inventory. In the less likely scenario that OPEC+ decides to deepen the cut by 1.9 mb/d, essentially returning to the first phase of the agreement, the price would break the $50/b mark and average $52.9/b in Q1 2021, again assuming that demand does not suffer from a new virus-induced shock. However, there is a fundamental trade-off with this option, as deeper cuts increase the risk of non-compliance. Our results show that if compliance deteriorates the oil prices in 2021 could lose as much as $7/b on annual terms, compared to our scenario of full compliance. Thus, whatever decision OPEC+ takes, maintaining high compliance is key.

[post_title] => Oil Market Recovery and the Balance of Risks [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-market-recovery-and-the-balance-of-risks [to_ping] => [pinged] => [post_modified] => 2020-11-16 11:44:15 [post_modified_gmt] => 2020-11-16 11:44:15 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=42716 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [15] => WP_Post Object ( [ID] => 42527 [post_author] => 111 [post_date] => 2020-11-09 12:18:57 [post_date_gmt] => 2020-11-09 12:18:57 [post_content] => After achieving month-on-month gains in every month between May and August, the Brent price shed some of these gains in September and October. While the main risks facing the oil market are still being dominated by demand factors, the risks on the supply side have also been on the rise. On the demand side, the recovery of oil demand has been slower than expected back in May and June, while global oil demand is now expected to take longer to reach its pre-crisis level. The pace of oil demand recovery has also been highly uneven both in terms of geography and fuels. In terms of geography, Asian demand remains robust led by China and India but in Europe where the reimposition of restrictions is already having its toll particularly on gasoline and jet fuel demand, demand seems to have stalled. In terms of fuels, jet fuel remains the weakest link by far, with diesel consumption impacted by the economic contractions, although rising trucking and freight is offering some respite. This unevenness in demand is causing refineries, particularly in Europe, massive headaches and alongside the ability to ramp up refinery runs and large product stocks it will continue to keep refining margins under pressure. The downside risks from the supply side have also been on the rise. To start with, there has been the return of Libyan barrels to the market. Libya’s crude production is now expected to rise above 1 mb/d by year end. The Alberta government has announced that it will stop setting monthly oil production limits for producers by December 2020 allowing producers to use available pipeline capacity. Also, there is a belief that with Biden now winning the election, the US will return to the Joint Comprehensive Plan of Action (JCPOA) fairly quickly and this implies around 1.2-1.5 million b/d could hit the market as soon as 2021. This scenario is being increasingly incorporated into the 2021 and 2022 balances. As the OPEC+ meeting approaches, the Group finds itself in an uncertain and harsh environment with the balance of risks tilted to the downside. In addition to the size of the cut and the high compliance, another key feature of the OPEC+ deal is that the agreement extends all the way to end of April 2022. This gives OPEC+ the potential to ‘tweak’ the deal to changing demand conditions and the potential 3 return of disrupted supplies. This requires a proactive and flexible approach and keeping compliance high under the different scenarios. Executive Summary [post_title] => Oil Market Recovery under Pressure [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-market-recovery-under-pressure [to_ping] => [pinged] => [post_modified] => 2020-11-09 14:54:25 [post_modified_gmt] => 2020-11-09 14:54:25 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=42527 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [16] => WP_Post Object ( [ID] => 41866 [post_author] => 111 [post_date] => 2020-10-16 13:55:03 [post_date_gmt] => 2020-10-16 12:55:03 [post_content] =>

Following the sharp price recovery in May/June which saw daily Brent rebounding above $40/b in June 5 from $19/b in April 21, before holding remarkably steady in the $40/b and $45/b in the course of July/August, September saw prices breaking on the downside of this range and trading below $40/b for the first time since June for few days. This was due to a combination of bearish factors both on the demand and the supply side. Concerns about the second wave of the coronavirus pandemic have led many to revise their demand forecasts downwards. Furthermore, China’s crude imports which have been a key equilibrium mechanism began to ease. On top of all this, there is much talk about peak oil demand with some suggesting that oil demand has already peaked. On the supply side, OPEC+ started easing their cuts and shut-in non-OPEC production in North America started making its way back to the market in response to higher prices. UAE undercompliance in August/September raised concerns over OPEC+ producers maintaining their high compliance levels. But despite the bearish headwinds, the $40/b oil price floor held firm in September and so far in October, and Brent remains well supported at the mid $40/b-$45/b range.

This presentation explores the key factors shaping the outlook for market fundamentals and oil prices ahead. The oil demand recovery has shifted into a lower gear and is highly uneven in terms of geography and different parts of the barrel and this unevenness will continue to shape prices and refining margins. Most importantly, there is wide recognition that the recovery of oil demand to its pre-crisis levels will take longer than many originally expected. But the wide uncertainty surrounding demand implies that the role of the supply side in supporting the oil price becomes even more important. High OPEC+ compliance has been a key feature in the current cycle and compliance will remain key throughout the entire duration of the agreement. Another unique feature has been the compensation mechanism and regardless if laggard producers compensate for their overproduction, the compensation scheme has an important signaling role. The effectiveness of the OPEC+ response however will be shaped by demand factors and the extent and pace of the global economic and oil demand recovery. Outside OPEC+, US shale is a key factor shaping non-OPEC supply but as in the case of oil demand, US shale recovery is also entering a slow and lengthy phase, due to the unprecedented fall in drilling activity, barriers to external finance and cash flow pressures. Putting these different moving parts into our model, the short-term price outlook sees the oil recovery persisting though the demand/supply risks to the outlook remain tilted to the downside.

[post_title] => Short-term Oil Market Outlook [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => short-term-oil-market-outlook [to_ping] => [pinged] => [post_modified] => 2020-10-16 13:55:03 [post_modified_gmt] => 2020-10-16 12:55:03 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=41866 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [17] => WP_Post Object ( [ID] => 40621 [post_author] => 111 [post_date] => 2020-09-01 12:10:07 [post_date_gmt] => 2020-09-01 11:10:07 [post_content] => Following the sharp recovery in the oil price, which saw Brent increase by more than $16/b during the months of May and June 2020, the Brent price has been stuck in the narrow $40/b-$45/b range since July and despite the heightened uncertainty, volatility has been exceptionally low. On the one hand, this reflects the fact that the recent price recovery was driven by improved market fundamentals both on the demand and the supply side and hence the current price range is well supported. On the other hand, the narrow price range and low volatility reflect a market that is not yet ready to move to a higher price range as the V-shaped recovery in demand seems to have now stalled as concerns over the recent resurgence in Covid-19 cases have resurfaced in many parts of the world. Given the wide uncertainty surrounding the medium and long-run prospects of oil demand and the slowdown in the momentum behind short-term oil demand, the role of the supply side in supporting the oil price becomes even more important in the current context. The historic OPEC+ agreement in April to cut output has been the key factor shaping the supply side. But the historic size of the cut would not have had its desired impact on prices and balances without the high compliance shown by OPEC+ (in the first phase of the agreement between May and July, OPEC+ producers achieved a high compliance rate of 97%). Achieving such high compliance without accounting for losses due to geopolitical disruptions and without GCC3 (Saudi Arabia, UAE and Kuwait) cutting above their quota and thus compensating for the rest of OPEC+ non-compliance has been a key feature of the recovery phase so far. This success could be attributed to Saudi Arabia’s clear signal that it will not tolerate any non-compliance as the cost of Saudi Arabia achieving full compliance on its own while the rest not fully complying is high enough to induce a shift in its output policy. The break-up of the OPEC+ agreement in March showed in a dramatic way that without a collective action on cuts, Saudi Arabia is willing to shift oil policy until players are ready to enter into an agreement. Once the agreement has been reached, Saudi Arabia offered to cut additional 1 mb/d in June, but this additional cut was temporary and limited in duration to one month and in July Saudi Arabia restored its output to the agreed quota level signaling that these additional measures should not be considered as permanent or be counted on to balance the market as was the case previously. The monthly meetings of the JMMC and the introduction of the compensation regimes are additional signals of the importance that Saudi Arabia attaches to compliance and its determination to lead on this front. Looking ahead, the pace of demand recovery and OPEC+ responses are the key dynamics that would shape market outcomes and will determine in which direction and how fast the oil price will break away from the current range. Our model indicates that the breakout will occur in Q4, but it will be gradual and limited on the upside. Also, the market seems more prepared to move to a higher rather than to a lower price range and has been waiting for some positive signals on the demand side, particularly from the US and India. A key reason for this ‘upward’ bias is that there is a belief that generalised lockdowns similar to what we have seen in March and April are not likely and therefore demand will recover even though at a slower pace. In the background, the view that the oil industry cannot increase investment and bring new supplies in this price environment and it will take time for US shale output to recover to its previous peak are also gaining traction. Also, the market has a pessimistic view on the return of some of the disrupted supplies from countries such as Iran, Venezuela and even Libya. But a key premise underlying the upward bias is that OPEC+ cohesiveness and high compliance will be maintained, and this represents a fundamental shift from previous cycles. [post_title] => After the Initial Oil Rebound: What Next for Market Fundamentals and Prices? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => after-the-initial-oil-rebound-what-next-for-market-fundamentals-and-prices [to_ping] => [pinged] => [post_modified] => 2020-09-01 12:10:07 [post_modified_gmt] => 2020-09-01 11:10:07 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=40621 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [18] => WP_Post Object ( [ID] => 38815 [post_author] => 111 [post_date] => 2020-06-23 10:30:56 [post_date_gmt] => 2020-06-23 09:30:56 [post_content] => This presentation provides an historical perspective from 1990 to 2018 of the functioning of the world oil market with and without OPEC. Analysis builds on a new methodology simulating counterfactual (i.e. what-if) outcomes in the rich context of state-of-the-art structural VAR models of the world oil market to empirically assess OPEC’s contribution to oil markets and the global economy by quantifying the impact of OPEC’s balancing role via its spare capacity cushion on the historical evolution of oil supply and demand, oil prices, volatility, the joint evolution of the supply and demand elasticities, global stocks and global welfare. A counterfactual scenario is constructed of how global oil production would have evolved if OPEC had been producing at maximum capacity, held no spare capacity and had held no balancing role since 1990. The analysis also employs a general equilibrium approach to determine the global welfare implications of a world without OPEC spare capacity across oil-exporting and oil-importing regions. The welfare effects are calculated based on regional GDP gains and losses following changes in oil production patterns globally. The methodology to determine the impact on GDP is based on a computable general equilibrium (CGE) framework which offers a high level of detail regarding the world economy in terms of economic sectors and regional interdependencies. The overarching aim is to assess the historical benefits and costs of OPEC for global oil market stability. Executive Summary [post_title] => OPEC at 60: The World With and Without OPEC [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => opec-at-60-the-world-with-and-without-opec [to_ping] => [pinged] => [post_modified] => 2020-06-23 10:32:43 [post_modified_gmt] => 2020-06-23 09:32:43 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=38815 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [19] => WP_Post Object ( [ID] => 37659 [post_author] => 111 [post_date] => 2020-05-11 11:39:40 [post_date_gmt] => 2020-05-11 10:39:40 [post_content] => April 2020 will be remembered as the bleakest month in the history of oil markets in terms of balances and prices. But looking ahead, there are signs of improvement both on the supply and demand fronts, though from a very low base. Many countries have started to ease the coronavirus-induced lockdowns which is expected to have positive impact on oil demand. On the supply-side, OPEC+ cuts will come into effect, while the supply responses outside the OPEC+ producers have been fast and severe. The impact of these factors is already being felt on oil prices and physical markets. In this Energy Comment we explore the range of uncertainties surrounding the post-crisis recovery of market balances and prices and assess the key factors that will shape oil market outcomes in 2020 and 2021. We identify the shape of the recovery of oil demand as the key factor dictating the rebalancing process. The oil market balances are also sensitive to OPEC+ compliance. If OPEC+ producers fail to abide fully by their quotas, the market rebalancing will be delayed till the end of 2020. The final factor determining the sensitivity of oil balances is the extent of supply reductions outside OPEC+. Unlike the 2014-2016 cycle, which came at the back of a sustained period of Brent prices above $100/b, the scale of the current demand shock is much bigger, and the financial position of all players is relatively weaker and therefore the supply contractions/production shut-ins will be deeper and faster in this cycle. The current oil shock and the transformation of the supply curve as a result, will present some opportunities to low cost producers with ability to increase production, particularly to Saudi Arabia. If the demand recovery proves to be stronger than expected, the Kingdom may find itself in a position to increase production and capture market share by substituting for production losses elsewhere (high output / low price). But this may require that prices remain in a range of $40-50/b so as not to encourage rapid supply growth in other parts of the world and to support the demand recovery. With higher production and more importantly higher exports, this strategy may result in similar payoff to a strategy of lower output and higher prices say in the $60-70/b range (low output / high price). But the higher output/lower price strategy has additional advantages. First, this is consistent with an array of existing domestic policies aimed at improving efficiency of energy consumption, energy pricing reforms, and increasing the share of gas and renewables in the power sector which will reduce domestic demand and free crude for exports. Second, by increasing production, the Kingdom can engage in faster monetization strategy at times when there are concerns that the energy transition will result in lower long-term demand for oil. Third, given that oil production still constitutes a significant part of GDP, higher production can support overall Saudi GDP growth. Fourth, when the next cycle arrives, Saudi Arabia can negotiate cuts with other producers from a much higher base. Finally, if the US shale supply response turns out to be weaker than in previous cycles because investors require higher price in order to be attracted again to US shale, especially in the aftermath of the shock of negative prices, then Saudi Arabia can increase both its exports and revenues. [post_title] => Is the Worst of the Oil Crisis Behind Us? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => is-the-worst-of-the-oil-crisis-behind-us [to_ping] => [pinged] => [post_modified] => 2020-05-11 15:42:50 [post_modified_gmt] => 2020-05-11 14:42:50 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=37659 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [20] => WP_Post Object ( [ID] => 36466 [post_author] => 111 [post_date] => 2020-03-30 11:43:40 [post_date_gmt] => 2020-03-30 10:43:40 [post_content] => The large contraction in oil demand due to the spread of COVID-19 and the dissolution of the OPEC⁺ agreement has combined to generate large shockwaves through oil and financial markets. The impact on prices and balances has been severe with Brent and WTI falling by more than 50% over two weeks in March 2020. Daily Brent tumbled to $24.9/b on March 18 from $51.9/b on March 2, while at the same time WTI fell to $20.4/b from $46.8/b. Volatility has heightened and the market has seen some extremely volatile price movements. The market has flipped from backwardation to deep contango with time spreads reaching levels wider than those during the 2008 global financial crisis. According to our structural VAR model, the supply-demand imbalance is projected to reach 5.7 mb/d in 2020 and 3.3 mb/d in 2021 which will further deepen the contango as inventories continue to build and traders increasingly resort to floating storage. Combined with the increase in exports from OPEC⁺ producers, this has already caused a large increase in Very Large Crude Carriers (VLCC) rates. Concerns about availability of storage will continue to put severe pressure on front prices and the shape of the forward curve. Physical differentials have also come under severe pressure and there are reports that prices for some US crudes in physical markets have turned negative. The ramping up of exports by OPEC⁺ producers in the face of collapsing demand is already causing a massive shift in trade flows with oil exporters such as West African producers finding it increasingly difficult to clear their loading programs, forcing them to slash differentials and offer their crude at large discounts. In short, this is a market that is being tested to its limits and all previous records in terms of price movements and physical indicators are being, or are set to be, broken. This presentation sets out to examine some of the recent dynamics and producers’ behaviour shaping the oil market and their likely evolution in the next few months. Executive Summary [post_title] => Oil Supply Shock in the time of the Coronavirus [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-supply-shock-in-the-time-of-the-coronavirus [to_ping] => [pinged] => [post_modified] => 2020-03-30 13:36:29 [post_modified_gmt] => 2020-03-30 12:36:29 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=36466 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [21] => WP_Post Object ( [ID] => 32655 [post_author] => 111 [post_date] => 2019-11-04 11:27:30 [post_date_gmt] => 2019-11-04 11:27:30 [post_content] => OPEC is faced with a wide range of uncertainties, which are perhaps best reflected in the gulf in narratives between the bulls and the bears. For the bulls, OPEC is in a strong position: the declines in non-OPEC supply are structural while the slowdown in global economic growth is temporary. Based on this view, a mini super-cycle is just around the corner: as demand rebounds, OPEC would be operating close to its maximum sustainable capacity at times when the geopolitical backdrop may reduce spare capacity further—a perfect combination for a sustained rise in oil price. Paradoxically, many of the bulls are the ones calling for deeper OPEC cuts. For the bears, it is the other way around: non-OPEC (US shale) supply would rebound strongly in response to higher oil prices and deeper OPEC cuts and the slowdown in the global economy could persist for longer as there is no end in sight for the US-China trade war. Also, according to this view, there is enough supply held off the market and thus concerns about spare capacity are exaggerated. The reality is likely to lie between these polar views and OPEC should resist being pushed into a corner. If either of these views does eventually materialize, the costs associated with maintaining and extending the current cuts into 2020 are low, with the potentially upside benefit that some of the views about the end of US shale growth could be put to the test. OPEC should leave part of the rebalancing to market mechanisms and resist reacting to noisy daily signals. OPEC+ is in a good position to do so especially its dominant players Saudi Arabia and Russia have succeeded in managing market expectations so far and have not infused the view that they would pursue deeper cuts and that they would do whatever it takes, at any cost, to support the oil price (interestingly, signals that the Kingdom would rebalance the market at any cost have emerged from other OPEC members, that have not been complying with their quotas, and are determined to defend prices by cutting Saudi barrels). For the first time in several years, Saudi Arabia is, so far, approaching the December meeting by not reacting to immediate market pressures and by not over-promising and hyping market expectations, which may give it the chance to over-deliver in 2020. [post_title] => The Dilemma Continues: OPEC choices amid high uncertainty [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => the-dilemma-continues-opec-choices-amid-high-uncertainty [to_ping] => [pinged] => [post_modified] => 2019-11-04 11:31:58 [post_modified_gmt] => 2019-11-04 11:31:58 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=32655 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [22] => WP_Post Object ( [ID] => 32369 [post_author] => 111 [post_date] => 2019-10-24 10:37:54 [post_date_gmt] => 2019-10-24 09:37:54 [post_content] => In a series of recent speeches and interviews, a consistent message coming from Saudi Aramco is that ‘future profit growth will be more from diversification into integrated oil refining and petrochemicals, besides natural gas production and supply for both the domestic and international markets’. But what about opportunities in the upstream oil sector and the potential expansion of oil productive capacity? How does upstream oil fit within the future portfolio of Aramco and the Kingdom’s role as the ‘central bank of oil’ as some describe it? These are key questions, which don’t only have implications for Saudi Aramco’s capex budget and how the budget is allocated across the various business segments and the company’s future sources of profitability growth, but also on oil market dynamics and the future of the Kingdom’s revenue paths. Much of the recent discourse has focused on the upside potential of Saudi Arabia’s oil productive capacity and every time Saudi Aramco announces plans to expand an existing field or develop a new field, there is much speculation whether this would represent a net capacity addition. Also, at times when expectations about global oil demand peaking soon are rife, many have argued that this would induce a shift in the output strategies of large resource owners. Those who recommend a fast monetization strategy however fail to appreciate the constraints that Saudi Arabia faces in pursuing such a strategy given the heavy reliance of the government’s income on oil revenues. For Saudi Arabia to pursue a strategy of fast monetization, it needs to diversify its sources of income away from oil exports, for instance by heavily taxing its businesses and individuals, without jeopardizing political and social stability. This requires deep economic and political structural transformations, which will take a long time to implement with no guarantee of success. Rather than pursing an aggressive monetization strategy, the question perhaps should be posed differently. In the current context of wide uncertainties about global oil demand and the speed of the energy transition and the limited diversification of government’s income, is there a case for Saudi Arabia to reduce its capacity to lower levels and/or let its spare capacity erode? It is argued that the strategy to manage a reduction of its output capacity could maximise revenues over the medium-term especially given that the capital costs are low in implementing such a strategy. However, there are adverse consequences for the Kingdom as a result of this strategy. For instance, Saudi Arabia would become a price taker; it would end up with a lower market share; it would undermine the Kingdom’s geopolitical status; and it would lose an important discipline mechanism. These are all significant costs. It may also require coordination with other low cost producers that would be eager to increase capacity. Such coordination is extremely difficult if not impossible. But it is important to make a few points. The alternative strategy of fast monetization of reserves is also associated with a high cost in terms of lower revenues. Also, Saudi Arabia cannot afford to be reactive in the event that the impacts of energy transition fully materialize, as the costs of absorbing such a shock are too high, not only in absolute terms, but also relative to other options. [post_title] => Saudi Arabia's Oil Productive Capacity - The Trade-Offs [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => saudi-arabias-oil-productive-capacity-the-trade-offs [to_ping] => [pinged] => [post_modified] => 2019-10-24 10:37:54 [post_modified_gmt] => 2019-10-24 09:37:54 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=32369 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [23] => WP_Post Object ( [ID] => 31851 [post_author] => 111 [post_date] => 2019-08-12 12:09:03 [post_date_gmt] => 2019-08-12 11:09:03 [post_content] => The sharp decline in the Brent price to below $60/barrel and the weakening of the oil demand outlook due to the US-China trade war has brought to the fore the issue of Saudi Arabia’s next move. There have been multiple media reports indicating that Saudi Arabia would not tolerate the latest price slide and that the Kingdom has approached other OPEC members to discuss possible steps to arrest the decline in the oil price. To most analysts and investors, this signals that Saudi Arabia is willing to cut its output further to try to maintain a floor under the oil price regardless of the nature of shocks hitting the market. Given that demand shocks are more persistent and that the trade war could take a long time to resolve with resulting repercussions being felt for many years, the required cuts may have to be deeper and maintained for longer. Saudi Arabia also faces the challenge of convincing other OPEC+ members to implement deeper cuts, especially given that the pool of those countries that can cut is small. Cutting unilaterally risks distorting other OPEC+ members’ incentives, shifting the entire burden of rebalancing to Saudi Arabia. But even if Saudi Arabia does cut output unilaterally, the oil price response may be muted in which case the Kingdom may end up with lower revenues. But if cutting output may not necessarily lead to higher revenues in the current context, could a policy of increasing output result in higher revenues in the medium term? In other words, could the revenue calculus facing the Kingdom change in the face of a negative demand shock? If the numerous reports that US shale is on its last legs and ‘the time for US shale is up’ are correct, and given that most of the growth in non-OPEC supply originates from the US, then it is straightforward to construct a scenario in which higher Saudi output would accelerate the slowdown in US shale and Saudi Arabia’s medium term revenues would rise as the Kingdom could increase its market share without negatively impacting the price. The reality however is that the US shale response is not yet understood and as recent history has shown, its performance can’t be predicted with any accuracy and it could be that many of the reports highlighting the extent of the current weaknesses and the decline in productivity of US shale are exaggerated. As such, the costs of undertaking such a strategy could be high while the benefits are highly uncertain. Given the risks and costs associated with each of the above options and the wide uncertainty regarding the size of the shocks and their persistence, the most likely scenario is for Saudi Arabia will not to deepen its cut further nor seek a new OPEC+ agreement for deeper cuts, in the hope that slower US shale growth and geopolitical outages will outweigh demand weakness and stocks will fall in the second half of the year. Looking at current market fundamentals alone, there is no urgent need to shift gears for now: the overall compliance within OPEC+ is robust, supply outages remain high, and US shale production growth has been showing signs of deceleration. Thus, on the supply side, almost everything is going in the Kingdom’s favour. The problem lies elsewhere and supply measures alone can’t counter the broad macro factors. Sometimes the best course of action is to do nothing. However, looking ahead into next year, the challenge of balancing the market gets more difficult if demand weakens further and Saudi Arabia may need to reconsider its policy. If expectations of a sharp fall in demand growth do materialise, it should consider all options as the trade-offs and the revenue calculus could change. However, until the divergence in expectations narrows and the macro sentiment stabilises, OPEC may find that its best option is to ‘stay on the sidelines’ but prepare for the increasing possibility of harder times ahead. [post_title] => Saudi Arabia's Next Oil Move [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => saudi-arabias-next-oil-move [to_ping] => [pinged] => [post_modified] => 2019-08-12 12:09:03 [post_modified_gmt] => 2019-08-12 11:09:03 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31851 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [24] => WP_Post Object ( [ID] => 31704 [post_author] => 111 [post_date] => 2019-06-26 14:08:53 [post_date_gmt] => 2019-06-26 13:08:53 [post_content] => Nowadays, oil market observers often start their analysis by pointing to two sets of factors pushing the oil price in opposite directions. On the one hand, supply outages from Iran and Venezuela and the rising geopolitical risks in the Middle East as US-Iran tensions escalate are keeping an upward pressure on the oil price. On the other hand, the US-China trade war and a general deterioration in global macroeconomic indicators are preventing prices from moving higher. In the background, the usual factors, such as whether OPEC will extend its cuts to the end of 2019, or even beyond, and the performance of US shale, will continue to shape market expectations and price outcomes. While it is relatively easy to construct ‘bullish’ scenarios in which oil market balances remain constructive and OECD stocks fall in the second half of 2019 - with the impact (in barrel terms) of supply outages from Iran and Venezuela and potentially Libya more than offsetting the impact of lower oil demand growth due to a weaker global economy, this type of analysis is too simplistic given that the shocks that hit the oil market are not alike. There is plenty of evidence to suggest that the nature of the shock matters and that demand shocks and supply shocks do not have the same impact on oil prices, with demand shocks being more persistent and having a bigger impact on oil price movements. In a similar vein, not all supply shocks are alike and historically the impact of exogenous supply shocks due to geopolitical outages has been shown to be short-lived, while demand shocks in the face of capacity constraints can have a persistent impact. Thus, building a case for a sustained rise in oil prices based on geopolitical outages and the ‘war risk’ premium on their own is not realistic in the current context of weaker demand prospects and when key OPEC members are cutting output to levels below their agreed quotas. In contrast, any deterioration in global oil demand prospects remains the biggest drag on oil prices. In fact, one could argue that in so far as geopolitical tensions act as a dampener on global growth by undermining investors’ confidence and pushing oil prices higher, as demand for precautionary purposes rises and the ‘war risk’ premium becomes more important, the recent rise in geopolitical tensions are not necessarily supportive of oil prices in the medium term. In this presentation, we provide evidence on the importance of identifying the nature of shocks when analysing oil market dynamics and oil prices and what these shocks imply for OPEC’s next move. Executive Summary [post_title] => Demand Shocks, Supply Shocks and Oil Prices: Implications for OPEC [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => demand-shocks-supply-shocks-and-oil-prices-implications-for-opec [to_ping] => [pinged] => [post_modified] => 2019-06-26 14:08:53 [post_modified_gmt] => 2019-06-26 13:08:53 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31704 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [25] => WP_Post Object ( [ID] => 31592 [post_author] => 1 [post_date] => 2019-05-22 10:29:28 [post_date_gmt] => 2019-05-22 09:29:28 [post_content] => The recent movements in the oil price complex indicate some deep dislocations between the physical and futures markets and in market expectations about current and future oil market fundamentals. Despite the various supply shocks hitting the oil market, the general deterioration in the geopolitical backdrop and the rise in US-Iran tensions, the Brent price has continued to trade within a very narrow price range since early April 2019. In contrast, time spreads are pointing towards very tight market conditions. In fact, the oil market finds itself in an almost opposite position to the same time last year when futures prices rose sharply in the expectation that market fundamentals would tighten, while the time spreads and physical differentials were pointing towards a well-supplied market. The divergence was eventually resolved in 2018 H2 by flat prices falling sharply. Looking ahead into 2019 H2, the oil market faces the key issue of how this divergence in expectations and the mixed signals from the physical and futures markets will eventually be resolved and, as ever, Saudi Arabia's output decision will play a key role in shaping market outcomes. In this respect, Saudi Arabia finds itself in a very similar position to last year where it has to make some hard choices and play a balancing act to try to achieve multiple objectives: Not risk pushing the market out of balance causing oil prices to fall, while at the same time preventing prices from getting too high and harming consuming countries and oil demand. Pressures from Russia to ease the supply curb and from the US to keep prices lower are not very different from last year’s, perhaps with one major difference, President Trump may be willing to live with slightly higher oil prices, recognizing that in a low oil price environment, US shale production growth would stall and that his key allies in the Middle East need a higher oil price to maintain government spending. Saudi Arabia would also be sensitive to the dynamics within OPEC+, aiming towards maintaining the deal that it has engineered and reinforcing the message that Saudi Arabia’s oil policy is driven purely by market fundamentals. Saudi Arabia’s deep cuts since December 2018, with current output at levels below its agreed quota, gives the Kingdom some flexibility to increase output without exiting the deal. But, as in 2018, this balancing act is hard to maintain given the wide uncertainties engulfing the market. [post_title] => Has Saudi Arabia's Balancing Act Gotten Any Easier? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => has-saudi-arabias-balancing-act-gotten-any-easier [to_ping] => [pinged] => [post_modified] => 2019-06-06 10:32:27 [post_modified_gmt] => 2019-06-06 09:32:27 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31592 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [26] => WP_Post Object ( [ID] => 31524 [post_author] => 111 [post_date] => 2019-04-25 15:21:02 [post_date_gmt] => 2019-04-25 14:21:02 [post_content] => Before the recent announcement on Iran sanction waivers, the base case for most analysts was that the US would renew the waivers allowing a few buyers to continue importing limited quantities of Iranian oil. The logic behind this thinking was very simple: the Trump administration would not risk an oil price spike that could endanger US growth prospects and hurt motorists by tightening sanctions on Iran and disrupting oil exports further. Thus, President Trump’s latest decision not to reissue waivers caught the market off guard and caused a mini rally in the oil price with Brent prices reaching a six month high of near $75/b. Trump has been keen to emphasize that the US secured offset commitments from Saudi Arabia and the UAE, and that these countries ‘along with other friends and allies, have committed to ensure that global oil markets remain adequately supplied ... and that global demand is met as all Iranian oil is removed from the market’. This latest decision comes on the back of a quarter which saw market fundamentals tighten due to deep output cuts from Saudi Arabia, which exceeded the pledged target, the sharp deterioration of Venezuelan output, and demand remaining relatively healthy despite widespread pessimism about global growth prospects. As the Brent price consolidated at above $70/b in early-April, market focus quickly shifted to whether OPEC+ will relax its output cuts or even exit the deal altogether in June. The US campaign of ‘maximum pressure’ on Iran has added another layer of uncertainty to an already complex web of events; Saudi Arabia’s response, the future of the OPEC⁺ agreement, the success of the US in driving Iran exports to ‘zero’, as well as demand prospects on both the upside and the downside. This comment assesses these risks and discusses the market outcomes under the different choices facing OPEC and Saudi Arabia. [post_title] => Iranian Sanctions 2.0: Oil Market Risks and Price Stakes [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => iranian-sanctions-2-0-oil-market-risks-price-stakes [to_ping] => [pinged] => [post_modified] => 2019-04-25 15:21:02 [post_modified_gmt] => 2019-04-25 14:21:02 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31524 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [27] => WP_Post Object ( [ID] => 31501 [post_author] => 111 [post_date] => 2019-04-02 12:11:48 [post_date_gmt] => 2019-04-02 11:11:48 [post_content] => In the second half of 2018, the oil market exhibited high volatility not only in terms of price levels but also time spreads and quality spreads. After reaching highs of $81/b and $71/b in October, monthly Brent and WTI prices ended the year in December at $57/b and $49/b respectively. At the same time, time spreads switched from backwardation to contango, as inventories rose above their 5-year average and the prospects for global demand worsened amid supplies increasing. The spreads between light sweet-medium sour crude also exhibited wide volatility, with the Brent-Dubai and WTI-Dubai spreads collapsing signalling a shortage of heavier sour crude globally. Brent and WTI prices have gained significantly since December 2018, ending-March 2019 near $67/b and $60/b respectively (about $10/b higher), and time spreads are once again in backwardation. That said, while the Brent price in the front of the curve has increased sharply since the last quarter, the back end of the forward curve remains relatively sticky at around $60/b, suggestive of the fact that the dominant narrative remains relatively bearish. This presentation provides an overview of the oil market and price dynamics in early 2019, discussing the key challenges in the year ahead and examining possible outcomes. Executive Summary [post_title] => An Overview of the Crude Oil Market in 2019 [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => overview-crude-oil-market-2019 [to_ping] => [pinged] => [post_modified] => 2019-04-02 12:30:46 [post_modified_gmt] => 2019-04-02 11:30:46 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31501 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [28] => WP_Post Object ( [ID] => 31468 [post_author] => 111 [post_date] => 2019-03-13 16:06:03 [post_date_gmt] => 2019-03-13 16:06:03 [post_content] =>

President Trump’s tweet on February 25 urging OPEC to ‘relax’ and to take it ‘easy’ with their cuts, and that a ‘fragile’ global economy can’t tolerate a higher oil price, did have an immediate price impact, with the Brent price declining by 4 per cent on the day, from nearly $67/b down to $64/b. But the ‘Trump tweet’ impact faded fairly quickly with oil prices gaining again towards the end of the same week. A clear signal from the Saudi energy minister Mr. Khalid Al-Falih in which he confirmed that OPEC and its partners would continue with their output cuts with the objective of achieving a more balanced market was a key factor behind the fast recovery. Extrapolating Saudi Arabia’s behavior in 2018 into 2019 is risky and the assumption that Saudi policy will reverse its current strategy under Trump’s pressure does not reflect the shift in Saudi thinking and the current uncertainties and weaknesses engulfing the oil market. This Energy Comment sheds some light on the current market uncertainties pertaining to the drivers and prospects of global demand growth in 2019, the clearing of the stocks overhang and the dilemma that OPEC and its partners currently face.

[post_title] => OPEC Policy in the Age of Trump [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => opec-policy-age-trump [to_ping] => [pinged] => [post_modified] => 2019-03-13 16:06:03 [post_modified_gmt] => 2019-03-13 16:06:03 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31468 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [29] => WP_Post Object ( [ID] => 31455 [post_author] => 111 [post_date] => 2019-03-06 11:03:06 [post_date_gmt] => 2019-03-06 11:03:06 [post_content] => The current sweet-sour crude oil imbalance is creating challenges for producers and refineries alike. While OPEC⁺ is striving to balance the market by the first half of 2019, unplanned outages from countries such as Venezuela, Iran and Canada and OPEC⁺ cuts have contributed to a large deficit in medium/heavy sour crudes. This is having a big impact on key market outcomes including trade flows, the dynamics of crude price differentials, and refining margins. The crude imbalance is also complicating planning and risk management decisions, especially at times when the International Maritime Organization (IMO) will enforce a new 0.5% global sulphur cap on bunker fuel from the 1^st of January 2020. This Energy Comment examines the dynamics of the sweet-sour crude price differentials, represented by the Brent-Dubai (BD) price spread and assesses how supply factors can impact the crude quality imbalance between light/heavy oil and sweet/sour crude and hence the crude price spreads in 2019. The results show that the current supply outages and OPEC⁺ cuts do not only impact price levels, but also the price differentials between the key sweet-sour benchmarks. Since most of the recent supply losses are concentrated in the medium/heavy sour category, while most of the supply gains are concentrated in the light sweet category in big part due to the strong growth in US shale, the light sweet-medium sour crude spread has collapsed and at certain instances was trading at negative values. Looking ahead, our paper predicts that, other things being equal, the downward pressure on light sweet - medium sour crude spreads will persist throughout this year as losses from countries like Iran and Venezuela due to sanctions may accelerate and as Saudi Arabia and its partners are expected to maintain the cuts until the end of 2019. This may have come as a surprise to some market analysts. A few months ago, the conventional wisdom was that the Brent-Dubai spread would widen as IMO rules start taking effect and the shipping industry shifts towards consuming cleaner fuels including Marine Gasoil (MGO) and compliant low sulphur fuel oils. This should have the impact of increasing demand for light sweet crudes while lowering demand for sour crudes. What our results show is that the IMO is only one of the many factors impacting spreads and supply factors are as important (if not more important) in determining movements in price differentials. In other words, the widening of the sweet-sour spreads may still occur, but this is far from a forgone conclusion. Our results also show that the current sweet-sour imbalance presents a challenge for OPEC⁺ and may complicate its efforts to balance the market. On the one hand, OPEC⁺cuts are contributing to balancing the market in terms of volumes; on the other hand, the surplus in light sweet crude persists. By cutting output, OPEC⁺ is tightening an already very tight medium/heavy sour market with potential implications on refining margins and eventually on global oil demand if complex refining margins weaken significantly. The key question facing OPEC⁺ producers is whether they should or can take any measures to resolve this quality imbalance or should they just leave it to the market mechanisms to resolve it. [post_title] => The Light Sweet-Medium Sour Crude Imbalance and the Dynamics of Price Differentials [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => light-sweet-medium-sour-crude-imbalance-dynamics-price-differentials [to_ping] => [pinged] => [post_modified] => 2019-03-06 15:09:23 [post_modified_gmt] => 2019-03-06 15:09:23 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31455 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [30] => WP_Post Object ( [ID] => 31409 [post_author] => 111 [post_date] => 2019-02-13 12:03:30 [post_date_gmt] => 2019-02-13 12:03:30 [post_content] => After a sharp fall towards the end of 2018, oil prices in 2019 started on a positive note recovering some of their losses. From the low point of $50/b reached on 28 December, the daily Brent price has increased to above $60/b with many analysts now expecting another year of sustained price volatility driven by a wide uncertainty pertaining to global supply and demand trends. But unlike 2017 and 2018, the woes engulfing the oil market in 2019 have extended to the demand-side. The prospects of the global economy and its potential impact on global oil demand, as well as the ability of OPEC+ producers to successfully enforce the agreed or even implement future deeper cuts (if necessary) to rebalance the market in the face of negative demand shocks are at the core of the current debate. Also, the unfolding geopolitical developments in Iran and Venezuela are expected to play a pivotal role in shaping oil market outcomes in 2019. In this Energy Insight, we revisit the main factors that shaped oil market dynamics in 2018 and analyse how the oil price path could evolve in 2019 by evaluating the prevailing risks underlying the world oil market using real-time forecast scenarios of the Brent price. Executive Summary

[post_title] => Oil Price Paths in 2019: Navigating Volatile Markets [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-price-paths-2019-navigating-volatile-markets [to_ping] => [pinged] => [post_modified] => 2019-02-14 15:56:40 [post_modified_gmt] => 2019-02-14 15:56:40 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31409 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [31] => WP_Post Object ( [ID] => 31282 [post_author] => 111 [post_date] => 2018-11-28 12:19:41 [post_date_gmt] => 2018-11-28 12:19:41 [post_content] => Oil market sentiment has turned very bearish over the last few weeks. The Brent price has fallen from highs of above $80/barrel in October to currently trading close to $60/barrel, global economic prospects have become highly uncertain, Saudi Arabia’s production is at record level of above 11.1 mb/d in November, Russia and other OPEC+ members that could increase production are producing at or close to maximum capacity, the range of estimates of Iranian losses remain very wide, OECD liquids stocks have returned to above their 5-year average, net-length financial positioning has fallen sharply, US shale output keeps surprising on the upside, and President Trump’s tweets about OPEC and oil prices have become a regular occurrence. Thus, when OPEC+ members meet next in December, they find themselves in a very different environment than the June 2018 meeting when the market’s main concern at the time was whether Saudi Arabia has enough spare capacity to put a cap on the oil price. In contrast, in the forthcoming OPEC meeting, the market concern is whether OPEC and its partners will implement deep enough cuts to reverse the recent decline in the oil price. This short presentation assesses the various choices that OPEC and its key player Saudi Arabia face. Executive Summary [post_title] => OPEC Choices are Getting Harder and Harder [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => opec-choices-getting-harder-harder [to_ping] => [pinged] => [post_modified] => 2018-11-28 12:19:41 [post_modified_gmt] => 2018-11-28 12:19:41 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31282 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [32] => WP_Post Object ( [ID] => 31199 [post_author] => 111 [post_date] => 2018-09-21 11:12:02 [post_date_gmt] => 2018-09-21 10:12:02 [post_content] =>

As OPEC’s Declaration of Cooperation with non-OPEC producers draws to a close (ending-2018), the future of this historic joint effort of 24 (now 25) OPEC and non-OPEC oil-producing countries has moved to the top of the producers’ agenda. The next Joint Ministerial Monitoring Committee’s meeting on September 23^rd in Algiers, could provide some hints regarding the future of the cooperative framework between the producers. Although OPEC and non-OPEC producers have collaborated in the past, albeit on a smaller scale, the Declaration of Cooperation has been a landmark agreement due to its success in meeting the many challenges faced in its planning, coordination and monitoring – at least in the short-term. Assessing its effectiveness beyond compliance levels and evaluating the dynamics underlying the success of the Agreement’s current framework as well as its members’ need for institutionalising a long-term cooperative framework, is of paramount importance for understanding what lies ahead and why oil policy will continue to matter in years to come. This Energy Comment discusses 5⁺¹ key facts about the Declaration of Cooperation that shed light on the prospects and challenges in OPEC/NOPEC producers’ pursuit of cooperation.

[post_title] => 5+1 Key Facts about the OPEC Declaration of Cooperation [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => 51-key-facts-opec-declaration-cooperation [to_ping] => [pinged] => [post_modified] => 2018-09-21 11:12:02 [post_modified_gmt] => 2018-09-21 10:12:02 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31199 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [33] => WP_Post Object ( [ID] => 31174 [post_author] => 111 [post_date] => 2018-09-04 11:08:41 [post_date_gmt] => 2018-09-04 10:08:41 [post_content] => This presentation discusses the oil market outlook for 2018 and 2019. It outlines the main factors behind the rebalancing of the oil market, including stronger than expected global oil demand growth and strong OPEC cohesion (caused in part due to involuntary cuts). The presentation then analyses the main trends shaping oil price outcomes in the short-term, including prospects for the global economy amidst growing concerns about escalating trade tensions and the health of emerging economies, US shale supply dynamics in the face of infrastructure constraints, OPEC behaviour, the recent shifts in crude oil trade flows and geopolitical disruptions. The presentation concludes with an analysis of the balance of risks facing the oil market and how the disconnections between short-term and long-term expectations are clouding the oil price outlook. [post_title] => The Crude Oil Market in 2018 & 2019 - How Did We Get Here & What Next? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => crude-oil-market-2018-2019-get-next [to_ping] => [pinged] => [post_modified] => 2018-09-04 11:08:41 [post_modified_gmt] => 2018-09-04 10:08:41 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31174 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [34] => WP_Post Object ( [ID] => 31158 [post_author] => 111 [post_date] => 2018-08-21 12:21:05 [post_date_gmt] => 2018-08-21 11:21:05 [post_content] => After a sharp rise in April/May this year, which saw Brent trading at above $80/barrel for several days, the upward pressure on the oil price eased in July with the Brent structure flipping into contango. This may have come as a surprise to many analysts who were expecting oil prices to continue on their upward trajectory. Because, after all, with OECD stocks falling below the five-year average, spare capacity at very thin levels, oil demand still growing robustly, production in Venezuela continuing its decline, supply losses from Iran projected to exceed 1 million b/d, and general deterioration of the geopolitical backdrop, surely the Brent price should have broken the $80/barrel ceiling? Instead, the oil price has held in the $70-$75/barrel range for most of July and into August 2018. While fears of trade wars and growing concerns about the health of emerging markets have impacted sentiment, it is the recent shift in OPEC, and particularly its dominant player Saudi Arabia’s, output policy which has had the biggest impact on physical balances, prices and the term structure to date. This reflects in part changing market fundamentals and a more uncertain environment, but also changes in the weight attached to the various objectives pursued by the Kingdom. This comment examines the causes of the most recent shift in Saudi oil policy, its adjustment in output in July, and the implications of recent behaviour on its signaling power. [post_title] => What to Make of Saudi Arabia's Recent Shift in its Output Policy? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => make-saudi-arabias-recent-shift-output-policy [to_ping] => [pinged] => [post_modified] => 2018-08-21 12:27:43 [post_modified_gmt] => 2018-08-21 11:27:43 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31158 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [35] => WP_Post Object ( [ID] => 31087 [post_author] => 111 [post_date] => 2018-06-18 11:24:55 [post_date_gmt] => 2018-06-18 10:24:55 [post_content] => As the OPEC oil ministers prepare to meet for their bi-annual Ordinary Meeting on 22 June, they are faced with some difficult choices. On the one hand, by extending the output cutbacks amidst a higher risk of output disruptions, OPEC risks overtightening the oil market and pushing oil prices higher, leading to an inevitable demand response. Moreover, involuntary cuts originating mainly from Venezuela, Angola, and Mexico mean that the oil market is tightening more quickly than anticipated. On the other hand, by exiting the agreement too early OPEC runs the risk of prices falling if such a decision is not supported by favourable market conditions, especially as ‘the clouds over the global economy are getting darker by the day’, and risks dismantling a historic coalition of OPEC/NOPEC producers which took massive diplomatic efforts to put together and the coordination of which proved critical for the rebalancing effort. In this Energy Insight, we consider the hard realities of oil market and price dynamics for 2018 and 2019 to derive, analyse, and assess, oil output policy scenarios that are likely to drive discussions during the upcoming OPEC Ministerial Meeting, through the lens of a structural VAR model of the global oil market. The decision for OPEC members that have the capacity to increase production is not only whether or not to increase output, but also by how much to increase production and whether to do it incrementally. Our results call for a cautious approach in which OPEC increases output gradually and reassess its options in November as this will help keep a solid floor on the oil price, which remains a key objective for all producers. We also find that future oil demand growth (especially in 2019) hinges heavily on the outcome of the upcoming OPEC⁺ meeting, just as the success of its oil output policy hinges heavily on the prospects of global oil demand remaining healthy. Finally, how OPEC decides to implement the output increase also matters. If the decision is to increase output, then it is in the best interest of OPEC⁺ to reach a collective decision, however this may not be feasible in the current context as the producers who don’t have the capacity to increase production and those who are subject to US sanctions are likely to refuse a recommendation to increase output. If it is not possible to reach a collective agreement on increasing output, the producers who have the capacity, and who could really influence market outcomes are then faced with three options: either to extend the current agreement of output cuts in order to maintain the cohesiveness of the coalition and risk the impact of higher oil prices on demand; exit the deal altogether and announce that they will increase their output regardless of the actions of other producers, bringing to an end the framework of cooperation; not dismantle the OPEC⁺ deal in the next meeting and postpone the difficult negotiations until November, while still going ahead and increasing output individually. While the last two options are not very different in terms of their impact on market balances, the choice of exit will affect sentiment and prices at least in the short-term. This shows the balancing role that OPEC has to play and the importance the key players should attach to retaining their flexibility. Executive Summary [post_title] => OPEC at the Crossroads [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => opec-at-the-crossroads [to_ping] => [pinged] => [post_modified] => 2018-06-18 11:24:55 [post_modified_gmt] => 2018-06-18 10:24:55 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31087 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [36] => WP_Post Object ( [ID] => 31020 [post_author] => 111 [post_date] => 2018-05-02 11:17:42 [post_date_gmt] => 2018-05-02 10:17:42 [post_content] => In this presentation, Bassam Fattouh and Andreas Economou analyse the choices facing OPEC+ in light of OECD stocks falling, recent gains in oil prices, alongside concerns that OPEC may be over-tightening the market and with commentators warning that current high oil prices will have a negative impact on oil demand and suggesting that OPEC+ should release withheld barrels back into the market to put a cap on the oil price. While OPEC+ should always be wary about the potential supply/demand responses in a higher oil price environment and should show willingness to act both on the upside and the downside, we argue that indicators based on stocks should not be its only guide for output policy and that stock movements should be seen merely as symptoms of underlying oil supply and oil demand shocks hitting the market. The fact that the market, and the media, as well as producers themselves would prefer to rely on ‘simple’, ‘measurable’ and ‘observable’ indicators, and that indicators based on shocks are highly uncertain as well as difficult to measure, does not mean that OPEC+ should not consider alternative and more complex metrics in their decision making. We consider OPEC+ exit strategy under different scenarios with price outcomes ranging from $80/b year-end to an average price of $50/b. It is perhaps this wide range of price outcomes, which may explain OPEC+ reluctance to exit the deal, especially given the time taken and the difficulties faced in concluding the output cut agreement and what makes it even more difficult for OPEC+ is that their decisions are endogenous and how they decide to act now will, in turn, shape market outcomes adding another layer of uncertainty. Executive Summary [post_title] => Oil Price Signals: What Next for OPEC+? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-price-signals-next-opec [to_ping] => [pinged] => [post_modified] => 2018-05-02 12:01:11 [post_modified_gmt] => 2018-05-02 11:01:11 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31020 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [37] => WP_Post Object ( [ID] => 30974 [post_author] => 111 [post_date] => 2018-04-06 11:06:01 [post_date_gmt] => 2018-04-06 10:06:01 [post_content] => OPEC exit strategy has been one of the key uncertainties engulfing the oil market. Most market focus has been on the level of inventories, as this is seen by many as a key indicator as to when OPEC may shift its current output policy. In this presentation, it is argued that the level of inventories, however measured, is a backward looking indicator, and hence is of little use for guiding OPEC’s next steps. Instead, through thorough analysis of the previous cycles we show that in the presence of a new source of supply, which is highly responsive to price signals, demand related shocks become much more important in shaping OPEC behaviour. The high output strategy adopted in 2015 was undermined by a negative demand shock. The current strategy of cutting output has succeeded in large part due to a strong positive demand shock, which caused inventories to continue to decline despite strong US shale response. Thus, the risks of potential ‘trade wars’ and the potential negative impact on the global economy and on oil demand if these risks do materialise should constitute a serious concern for OPEC. OPEC’s current strategy hinges heavily on the prospects of future demand growth. If demand continues to surprise on the upside (positive demand shock), then OPEC will most likely maintain its strategy and may decide to release some of the withheld crude back to the market. If demand surprises on the downside (negative demand shock), then OPEC’s choices become very stark: OPEC could either decide to cut output to support prices or shift toward a higher output strategy. Both choices carry hefty risks reflecting the delicate situation that OPEC finds itself in as a result of the shift in policy back in November 2016. Executive Summary [post_title] => Oil Supply Balances: The Four Cycles of the OPEC Oil Output Policy [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-supply-balances-four-cycles-opec-oil-output-policy [to_ping] => [pinged] => [post_modified] => 2018-04-06 11:18:20 [post_modified_gmt] => 2018-04-06 10:18:20 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=30974 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [38] => WP_Post Object ( [ID] => 30863 [post_author] => 111 [post_date] => 2018-02-13 11:41:06 [post_date_gmt] => 2018-02-13 11:41:06 [post_content] => 2018 started on a positive note for oil markets with Brent prices breaking through $70 a barrel for a few days and all the key international crude oil benchmarks flipping into backwardation. Yet, there is still a wide uncertainty engulfing the oil market, with very divergent views among market observers about how the oil price path could evolve in 2018, with some revising upwards their forecasts to higher than $80/b while others are less convinced that the market fundamentals can sustainably support a price above $70/b, expecting a lower path in the mid $60/b. The key uncertainties behind these divergent views mainly pertain to different views about:

The OPEC/NOPEC exit strategy from the output cut agreement reached in November 2016;
US shale supply response to the recent oil price rise;
The potential impact of higher oil prices on global oil demand;
The extent of supply disruptions amid a fragile geopolitical environment.

In this Energy Insight, we analyse how the oil price path could evolve in 2018 by evaluating the aforementioned risks underlying the world oil market using a structural model of the oil market and considering various forecast scenarios. Forecast scenarios are not predictions of what will happen, but rather modelled projections of various oil price risks conditional on certain events that are known at the time of the forecast or some other hypothetical events. Our reference forecast scenario projects for Brent to trade within a narrow price range, with a price floor at above $60/b and a ceiling of below $75/b, with a 2018 average price of $67/b. The baseline forecast suggests that the momentum of stronger than expected oil demand and the OPEC/NOPEC output cuts have tightened the oil market in 2017 and even with no change in current market dynamics, the oil price will continue to be supported at around $65/b. Our results show that for 2018, US shale output growth will be the key factor putting a ceiling on the oil price, while supply disruptions could provide some support to the oil price, with a sharp fall in Venezuelan output constituting the biggest geopolitical risk that could push prices well above our baseline or reference forecasts. The results also show the paramount importance for the strong oil demand momentum experienced in 2017 to continue in 2018 for rebalancing the market and supporting the oil price. Finally, our results show that for OPEC/NOPEC to maintain the recent price gains, they have to extend their output cut until the end of 2018; releasing the withheld barrels under the current agreement would result in a sharp fall in oil prices, suggesting that OPEC/NOPEC should be very wary about unwinding the output cut agreement when they next meet in June 2018. [post_title] => Oil Price Paths in 2018: The Interplay between OPEC, US Shale and Supply Interruptions [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-price-paths-2018-interplay-opec-us-shale-supply-interruptions [to_ping] => [pinged] => [post_modified] => 2018-02-13 11:41:06 [post_modified_gmt] => 2018-02-13 11:41:06 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=30863 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [39] => WP_Post Object ( [ID] => 30761 [post_author] => 111 [post_date] => 2017-12-07 09:50:22 [post_date_gmt] => 2017-12-07 09:50:22 [post_content] => Using novel measures that decompose oil supply shocks into its exogenous supply (driven by exogenous geopolitical events in OPEC countries) and endogenous supply (driven by investment dynamics within the oil sector) components, this paper offers a fresh perspective on the role of supply, flow demand and speculative demand shocks in explaining the changes in the real price of oil over the last three decades. We show that while exogenous supply shocks are non-negligible, endogenous supply shocks have generated larger and more persistent price responses than previously thought. Earlier studies have consistently shown that positive shifts in the flow demand for oil were responsible for most of the oil price surge between 2002-2008. But this paper shows that endogenous production capacity constraints, which restricted the ability of producers to ramp up production to meet the unexpected increase in demand, added at least $50/barrel to the real price of oil during that period. More recently, endogenous oil supply shocks alone accounted roughly for twice as much as any other supply or demand shock in explaining the 2014 oil price collapse. Specifically, of the $64 per barrel cumulative decline in the real price of oil from June 2014 to January 2015, our model estimates that $29 have been due to endogenous oil supply shocks, $13 have been due to exogenous oil supply shocks, and $12 have been due to flow demand shocks. The paper concludes by demonstrating that forecasting models that are able to distinguish between exogenous and endogenous supply shocks generate more realistic out-of-sample estimates of the sequences of the structural shocks, thus resulting in higher real-time predictive accuracy than forecasting models that use a collective measure of a flow supply shock. Full paper [post_title] => A Structural Model of the World Oil Market: The Role of Investment Dynamics and Capacity Constraints in Explaining the Evolution of the Real Price of Oil [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => structural-model-world-oil-market-role-investment-dynamics-capacity-constraints-explaining-evolution-real-price-oil [to_ping] => [pinged] => [post_modified] => 2017-12-07 09:55:31 [post_modified_gmt] => 2017-12-07 09:55:31 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=30761 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [40] => WP_Post Object ( [ID] => 30041 [post_author] => 111 [post_date] => 2017-01-24 10:25:18 [post_date_gmt] => 2017-01-24 10:25:18 [post_content] =>

This paper explores how the oil price path could evolve in 2017 by assessing the various oil price risks under alternative forecast scenarios pertaining to future market conditions. It is shown that even without the OPEC-non-OPEC output cut agreement in November 2016, the three-year long price fall would eventually have come to a halt and stabilized at close to $41/b in 2017 based solely on market forces. The agreement, however, helped accelerate the price recovery by stabilising the oil price near $50/b. That said, the current price at above $50/b already incorporates the bulk of the expected gains from the full enforcement of the production cuts and reflects the positive shift of market sentiment that has been building-up in anticipation of the implementation of the output cut agreement. Thus, for the next year, the oil price path is more sensitive to downside risks depending on the discipline of OPEC and non-OPEC oil producers. In fact, for the price recovery to be sustained in 2017, OPEC efforts must be met by favourable market conditions in the form of an unexpected surge in global oil demand amid a moderate expansion of US shale supply. On the contrary, a deterioration of global economic activity, or an aggressive expansion of US shale supply, or both, could reverse the current momentum. Moreover, a return of oil production from conflict inflicted countries Libya and Nigeria could undermine the OPEC agreement from within. Eventually, whatever scenario plays out, OPEC will continue to assess the market conditions and in the second half of 2017, it can decide on whether to extend the agreement to offset any losses to the anticipated oil price recovery that may arise from changes in oil market conditions or to drop the agreement all together. But regardless which way the decision goes, the latest output cut agreement is critical to resolving fundamental uncertainties about the shock hitting the oil market and OPEC behaviour in a more uncertain world.

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24.02.23

Short Term Oil Market Outlook: Q1 2023

This new OIES presentation on the Short-Term Oil Market Outlook focuses on the two main swing factors that dominate the oil market outlook in 2023. First, we take a closer look on China’s oil outlook and how the recovery path of Chinese demand could evolve following the reversal of China’s zero-COVID policy and the country’s […]

By: Bassam Fattouh Andreas Economou

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17.01.23

Oil Markets in 2023: The Year of the Aftershocks

Oil has always assumed a special position within the energy complex. Oil is a global and mature market, fungible, with many interrelated physical and financial layers, diverse set of players both on the demand and the supply side and has dealt with many shocks in the past (geopolitical and weather-related outages and demand shocks). Nevertheless, […]

By: Bassam Fattouh Andreas Economou Ahmed Mehdi

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18.10.22

Short-Term Oil Market Outlook: Prospects, Risks and Uncertainty

New OIES presentation – Short-Term Oil Market Outlook: Prospects, Risks and Uncertainty. Key points: The market is torn between a bullish micro-oil story and a bearish macro story. This is exacerbated by potential government intervention (price caps, embargoes, talks of restrictions of US products exports) and macroeconomic measures (aggressive tightening of monetary policy). Volatility also […]

By: Bassam Fattouh Andreas Economou

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08.08.22

Asian Energy Markets Following the Russian Invasion of Ukraine

Russia’s invasion of Ukraine continues to strongly impact international energy markets, posing severe challenges for energy importing countries. Much of the commentary and analysis has been focused on the consequences for, and reactions of, European nations and the European Union. Despite the fact that each region has its own specific dynamics, the global nature of […]

By: Michal Meidan Mohua Mukherjee Philip Andrews-Speed Yan Qin Mike Fulwood Andreas Economou

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04.08.22

Oil market volatility: Assessing the bullish and bearish narratives

Volatility has been the name of the game in oil markets where we have recently seen some very sharp movements in oil prices and spreads. This reflects the high degree of uncertainty surrounding the oil market both on the supply and the demand side, but also lower liquidity which is amplifying some of these price […]

By: Bassam Fattouh Andreas Economou

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10.06.22

Russia’s invasion of Ukraine and oil market dynamics

This new OIES presentation assesses the implications of the tightening sanctions on Russian oil for crude and product markets, as well as the short-term oil market outlook in terms of supply/demand and price dynamics. Some key points: The immediate restrictions on Russian crude and products flows remain driven by self- sanctioning. But the EU’s recently […]

By: Bassam Fattouh Andreas Economou

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06.05.22

Implication of the proposed EU ban of Russian oil for global oil markets

This new OIES presentation features our initial empirical assessment of the implications of the proposed EU ban on Russian oil for supply/demand and price dynamics to 2023. Although the degree of uncertainty surrounding the actual size of Russian supply disruptions remains high, March 2022 data show a very small m/m disruption of less than 1% […]

By: Bassam Fattouh Andreas Economou

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04.04.22

Russia’s invasion of Ukraine and global oil market scenarios

This new OIES presentation features a comprehensive empirical assessment of the implications of the Ukraine war on oil price and supply/demand dynamics via a number of forecast scenarios examining the size of disruption in Russian supplies, OPEC and non-OPEC supply response, the impact of the latest US announcement of SPR release and other uncertainty scenarios. […]

By: Bassam Fattouh Andreas Economou

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02.03.22

Russia-Ukraine crisis: Implications for global oil markets

After weeks of tensions, Russian President Vladimir Putin ordered Russian troops to invade Ukraine, prompting an international sanctions response targeting Russia’s economy but not directly its oil supplies or energy payments. But as sanctions on Russia intensified and as financial institutions started to refuse financing Russia-related transactions, including opening letters of credit or clearing payments […]

By: Bassam Fattouh Andreas Economou Ahmed Mehdi

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28.07.21

OPEC+ and Short-Term Oil Market Dynamics

This new OIES presentation looks at the extension of the OPEC+ deal to the end of 2022 and implications on oil markets: Global oil demand has lost some momentum recently, but the fundamentals remain solid where demand is still expected to grow by 5.6 mb/d in 2021 and further 3.3 mb/d in 2022. OPEC+ to […]

By: Bassam Fattouh Andreas Economou

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25.05.21

OPEC at 60: the world with and without OPEC

This paper provides a historical perspective from 1990 to 2018 of the functioning of the world oil market with and without OPEC. Analysis builds on a new methodology simulating counterfactual (i.e. what-if) outcomes in the rich context of state-of-the-art structural VAR models of the world oil market to empirically assess OPEC’s contribution to oil markets […]

By: Bassam Fattouh Andreas Economou
07.12.20

The COVID-19 Shock and the Curious Case of Missing Barrels

In almost every oil cycle, the market is confronted with the problem of ‘missing barrels’, the gap between the change in inventory implied by global supply-demand balances on the one hand and the observed change in inventory levels by commercial and government entities (adjusted for floating storage and oil in transit) on the other hand. […]

By: Bassam Fattouh Andreas Economou Michal Meidan

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16.11.20

Oil Market Recovery and the Balance of Risks

While the market is shifting its attention to OPEC+ dynamics and the return of Libyan and Iranian barrels, the reality remains that this is first and foremost a demand shock and ultimately the evolution of demand will be the key factor shaping oil market outcomes. This demand shock is special in many ways compared to […]

By: Bassam Fattouh Andreas Economou

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09.11.20

Oil Market Recovery under Pressure

After achieving month-on-month gains in every month between May and August, the Brent price shed some of these gains in September and October. While the main risks facing the oil market are still being dominated by demand factors, the risks on the supply side have also been on the rise. On the demand side, the […]

By: Bassam Fattouh Andreas Economou

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16.10.20

Short-term Oil Market Outlook

Following the sharp price recovery in May/June which saw daily Brent rebounding above $40/b in June 5 from $19/b in April 21, before holding remarkably steady in the $40/b and $45/b in the course of July/August, September saw prices breaking on the downside of this range and trading below $40/b for the first time since […]

By: Bassam Fattouh Andreas Economou

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01.09.20

After the Initial Oil Rebound: What Next for Market Fundamentals and Prices?

Following the sharp recovery in the oil price, which saw Brent increase by more than $16/b during the months of May and June 2020, the Brent price has been stuck in the narrow $40/b-$45/b range since July and despite the heightened uncertainty, volatility has been exceptionally low. On the one hand, this reflects the fact […]

By: Bassam Fattouh Andreas Economou

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23.06.20

OPEC at 60: The World With and Without OPEC

This presentation provides an historical perspective from 1990 to 2018 of the functioning of the world oil market with and without OPEC. Analysis builds on a new methodology simulating counterfactual (i.e. what-if) outcomes in the rich context of state-of-the-art structural VAR models of the world oil market to empirically assess OPEC’s contribution to oil markets […]

By: Bassam Fattouh Andreas Economou

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11.05.20

Is the Worst of the Oil Crisis Behind Us?

April 2020 will be remembered as the bleakest month in the history of oil markets in terms of balances and prices. But looking ahead, there are signs of improvement both on the supply and demand fronts, though from a very low base. Many countries have started to ease the coronavirus-induced lockdowns which is expected to […]

By: Bassam Fattouh Andreas Economou

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30.03.20

Oil Supply Shock in the time of the Coronavirus

The large contraction in oil demand due to the spread of COVID-19 and the dissolution of the OPEC+ agreement has combined to generate large shockwaves through oil and financial markets. The impact on prices and balances has been severe with Brent and WTI falling by more than 50% over two weeks in March 2020. Daily Brent tumbled to […]

By: Bassam Fattouh Andreas Economou

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04.11.19

The Dilemma Continues: OPEC choices amid high uncertainty

OPEC is faced with a wide range of uncertainties, which are perhaps best reflected in the gulf in narratives between the bulls and the bears. For the bulls, OPEC is in a strong position: the declines in non-OPEC supply are structural while the slowdown in global economic growth is temporary. Based on this view, a […]

By: Bassam Fattouh Andreas Economou

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24.10.19

Saudi Arabia’s Oil Productive Capacity – The Trade-Offs

In a series of recent speeches and interviews, a consistent message coming from Saudi Aramco is that ‘future profit growth will be more from diversification into integrated oil refining and petrochemicals, besides natural gas production and supply for both the domestic and international markets’. But what about opportunities in the upstream oil sector and the […]

By: Bassam Fattouh Andreas Economou

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12.08.19

Saudi Arabia’s Next Oil Move

The sharp decline in the Brent price to below $60/barrel and the weakening of the oil demand outlook due to the US-China trade war has brought to the fore the issue of Saudi Arabia’s next move. There have been multiple media reports indicating that Saudi Arabia would not tolerate the latest price slide and that […]

By: Bassam Fattouh Andreas Economou

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26.06.19

Demand Shocks, Supply Shocks and Oil Prices: Implications for OPEC

Nowadays, oil market observers often start their analysis by pointing to two sets of factors pushing the oil price in opposite directions. On the one hand, supply outages from Iran and Venezuela and the rising geopolitical risks in the Middle East as US-Iran tensions escalate are keeping an upward pressure on the oil price. On […]

By: Bassam Fattouh Andreas Economou

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22.05.19

Has Saudi Arabia’s Balancing Act Gotten Any Easier?

The recent movements in the oil price complex indicate some deep dislocations between the physical and futures markets and in market expectations about current and future oil market fundamentals. Despite the various supply shocks hitting the oil market, the general deterioration in the geopolitical backdrop and the rise in US-Iran tensions, the Brent price has […]

By: Bassam Fattouh Andreas Economou

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25.04.19

Iranian Sanctions 2.0: Oil Market Risks and Price Stakes

Before the recent announcement on Iran sanction waivers, the base case for most analysts was that the US would renew the waivers allowing a few buyers to continue importing limited quantities of Iranian oil. The logic behind this thinking was very simple: the Trump administration would not risk an oil price spike that could endanger […]

By: Bassam Fattouh Andreas Economou

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02.04.19

An Overview of the Crude Oil Market in 2019

In the second half of 2018, the oil market exhibited high volatility not only in terms of price levels but also time spreads and quality spreads. After reaching highs of $81/b and $71/b in October, monthly Brent and WTI prices ended the year in December at $57/b and $49/b respectively. At the same time, time […]

By: Bassam Fattouh Andreas Economou

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13.03.19

OPEC Policy in the Age of Trump

President Trump’s tweet on February 25 urging OPEC to ‘relax’ and to take it ‘easy’ with their cuts, and that a ‘fragile’ global economy can’t tolerate a higher oil price, did have an immediate price impact, with the Brent price declining by 4 per cent on the day, from nearly $67/b down to $64/b. But […]

By: Bassam Fattouh Andreas Economou

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06.03.19

The Light Sweet-Medium Sour Crude Imbalance and the Dynamics of Price Differentials

The current sweet-sour crude oil imbalance is creating challenges for producers and refineries alike. While OPEC+ is striving to balance the market by the first half of 2019, unplanned outages from countries such as Venezuela, Iran and Canada and OPEC+ cuts have contributed to a large deficit in medium/heavy sour crudes. This is having a […]

By: Bassam Fattouh Andreas Economou

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13.02.19

Oil Price Paths in 2019: Navigating Volatile Markets

After a sharp fall towards the end of 2018, oil prices in 2019 started on a positive note recovering some of their losses. From the low point of $50/b reached on 28 December, the daily Brent price has increased to above $60/b with many analysts now expecting another year of sustained price volatility driven by […]

By: Bassam Fattouh Andreas Economou

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28.11.18

OPEC Choices are Getting Harder and Harder

Oil market sentiment has turned very bearish over the last few weeks. The Brent price has fallen from highs of above $80/barrel in October to currently trading close to $60/barrel, global economic prospects have become highly uncertain, Saudi Arabia’s production is at record level of above 11.1 mb/d in November, Russia and other OPEC+ members […]

By: Bassam Fattouh Andreas Economou

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21.09.18

5+1 Key Facts about the OPEC Declaration of Cooperation

As OPEC’s Declaration of Cooperation with non-OPEC producers draws to a close (ending-2018), the future of this historic joint effort of 24 (now 25) OPEC and non-OPEC oil-producing countries has moved to the top of the producers’ agenda. The next Joint Ministerial Monitoring Committee’s meeting on September 23rd in Algiers, could provide some hints regarding […]

By: Andreas Economou Bassam Fattouh

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04.09.18

The Crude Oil Market in 2018 & 2019 – How Did We Get Here & What Next?

This presentation discusses the oil market outlook for 2018 and 2019. It outlines the main factors behind the rebalancing of the oil market, including stronger than expected global oil demand growth and strong OPEC cohesion (caused in part due to involuntary cuts). The presentation then analyses the main trends shaping oil price outcomes in the […]

By: Bassam Fattouh Andreas Economou

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21.08.18

What to Make of Saudi Arabia’s Recent Shift in its Output Policy?

After a sharp rise in April/May this year, which saw Brent trading at above $80/barrel for several days, the upward pressure on the oil price eased in July with the Brent structure flipping into contango. This may have come as a surprise to many analysts who were expecting oil prices to continue on their upward […]

By: Bassam Fattouh Andreas Economou

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18.06.18

OPEC at the Crossroads

As the OPEC oil ministers prepare to meet for their bi-annual Ordinary Meeting on 22 June, they are faced with some difficult choices. On the one hand, by extending the output cutbacks amidst a higher risk of output disruptions, OPEC risks overtightening the oil market and pushing oil prices higher, leading to an inevitable demand […]

By: Bassam Fattouh Andreas Economou

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02.05.18

Oil Price Signals: What Next for OPEC+?

In this presentation, Bassam Fattouh and Andreas Economou analyse the choices facing OPEC+ in light of OECD stocks falling, recent gains in oil prices, alongside concerns that OPEC may be over-tightening the market and with commentators warning that current high oil prices will have a negative impact on oil demand and suggesting that OPEC+ should […]

By: Bassam Fattouh Andreas Economou

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06.04.18

Oil Supply Balances: The Four Cycles of the OPEC Oil Output Policy

OPEC exit strategy has been one of the key uncertainties engulfing the oil market. Most market focus has been on the level of inventories, as this is seen by many as a key indicator as to when OPEC may shift its current output policy. In this presentation, it is argued that the level of inventories, […]

By: Bassam Fattouh Andreas Economou

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13.02.18

Oil Price Paths in 2018: The Interplay between OPEC, US Shale and Supply Interruptions

2018 started on a positive note for oil markets with Brent prices breaking through $70 a barrel for a few days and all the key international crude oil benchmarks flipping into backwardation. Yet, there is still a wide uncertainty engulfing the oil market, with very divergent views among market observers about how the oil price […]

By: Bassam Fattouh Andreas Economou

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07.12.17

A Structural Model of the World Oil Market: The Role of Investment Dynamics and Capacity Constraints in Explaining the Evolution of the Real Price of Oil

Using novel measures that decompose oil supply shocks into its exogenous supply (driven by exogenous geopolitical events in OPEC countries) and endogenous supply (driven by investment dynamics within the oil sector) components, this paper offers a fresh perspective on the role of supply, flow demand and speculative demand shocks in explaining the changes in the […]

By: Andreas Economou Paolo Agnolucci Bassam Fattouh Vincenzo De Lipsis

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24.01.17

Oil Price Paths in 2017: Is a Sustained Recovery of the Oil Price Looming?

This paper explores how the oil price path could evolve in 2017 by assessing the various oil price risks under alternative forecast scenarios pertaining to future market conditions. It is shown that even without the OPEC-non-OPEC output cut agreement in November 2016, the three-year long price fall would eventually have come to a halt and […]

By: Andreas Economou Bassam Fattouh Paolo Agnolucci Vincenzo De Lipsis

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31.08.16

Not all oil supply shocks are alike either – Disentangling the supply determinant

Analysis of oil price shocks using fundamental measures has for years puzzled researchers. Recent theoretical and empirical work has made considerable improvements on how to model the global oil market. Yet, many studies document a decrease in the explanatory ability of the supply side of the market, as there appears little evidence that oil supply […]

By: Andreas Economou

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Andreas Economou

Head of Oil Research

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Latest Publications by Andreas Economou

Global Oil Market Update: H2 2023

Oil Relations and the Balance of Power between the Big-3 Oil Producers: Transformations and impacts

Short Term Oil Market Outlook: Q1 2023

Oil Markets in 2023: The Year of the Aftershocks

Short-Term Oil Market Outlook: Prospects, Risks and Uncertainty

Asian Energy Markets Following the Russian Invasion of Ukraine

Oil market volatility: Assessing the bullish and bearish narratives

Russia’s invasion of Ukraine and oil market dynamics

Implication of the proposed EU ban of Russian oil for global oil markets

Russia’s invasion of Ukraine and global oil market scenarios

Russia-Ukraine crisis: Implications for global oil markets

OPEC+ and Short-Term Oil Market Dynamics

OPEC at 60: the world with and without OPEC

The COVID-19 Shock and the Curious Case of Missing Barrels

Oil Market Recovery and the Balance of Risks

Oil Market Recovery under Pressure

Short-term Oil Market Outlook

After the Initial Oil Rebound: What Next for Market Fundamentals and Prices?

OPEC at 60: The World With and Without OPEC

Is the Worst of the Oil Crisis Behind Us?

Oil Supply Shock in the time of the Coronavirus

The Dilemma Continues: OPEC choices amid high uncertainty

Saudi Arabia’s Oil Productive Capacity – The Trade-Offs

Saudi Arabia’s Next Oil Move

Demand Shocks, Supply Shocks and Oil Prices: Implications for OPEC

Has Saudi Arabia’s Balancing Act Gotten Any Easier?

Iranian Sanctions 2.0: Oil Market Risks and Price Stakes

An Overview of the Crude Oil Market in 2019

OPEC Policy in the Age of Trump

The Light Sweet-Medium Sour Crude Imbalance and the Dynamics of Price Differentials

Oil Price Paths in 2019: Navigating Volatile Markets

OPEC Choices are Getting Harder and Harder

5+1 Key Facts about the OPEC Declaration of Cooperation

The Crude Oil Market in 2018 & 2019 – How Did We Get Here & What Next?

What to Make of Saudi Arabia’s Recent Shift in its Output Policy?

OPEC at the Crossroads

Oil Price Signals: What Next for OPEC+?

Oil Supply Balances: The Four Cycles of the OPEC Oil Output Policy

Oil Price Paths in 2018: The Interplay between OPEC, US Shale and Supply Interruptions

A Structural Model of the World Oil Market: The Role of Investment Dynamics and Capacity Constraints in Explaining the Evolution of the Real Price of Oil

Oil Price Paths in 2017: Is a Sustained Recovery of the Oil Price Looming?

Not all oil supply shocks are alike either – Disentangling the supply determinant

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