Page 43 - Linkline Autumn 2016

Commercial Crude (Millions of Barrels)
Other Factors
Nigeria’s supply disruption has been one of the biggest factors to have increased oil prices in the last few months. However, the number of militant attacks on Nigeria’s oil and gas installations have decreased recently, which means the effect of their supply disruption will eventually fade away from the markets.
Although there are chances that militants may again resume their attacks on oil and gas in- stallations located in Niger Delta. The Nigerian government has launched a new offensive against militants to reduce this happening.
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President Putin, of course, has one eye on the presidential election in Russia in March 2018 and needs some feel-good factor to spread ahead of this. The country has being hit hard economically since the collapse in oil prices in 2014 and international sanctions as a result of its actions in the Ukraine.
Saudi Arabia is also in a regional competition with Iran and Russia and sure enough as prices were approaching $50 price levels, Min- ister Khalid Al Falih came out again with a contradicting statement at the end of August. “We don’t believe any significant intervention in the market is necessary other than to allow the forces of supply and demand to do the work for us, market is moving in the right direction.” That is to say – “we will be continuing as we are and let the chips fall where they may as we have more oil and money than anyone else and we can ride it out.” Not a welcome statement for some OPEC members.
Aug 21, 2015 Oct 23, 2015 Dec 25, 2015 Feb 26, 2016 Apr 29, 2016 Jul 1, 2016
An under-reported issue likely to impact on prices is China’s domes- tic oil production, which is declining after it peaked in 2015. One
of the biggest guzzlers of oil on the planet, any decline in China’s domestic oil production will increase its oil imports, and this will, in turn, increase oil prices.
However, the ratings agency, Moody’s, recently warned of a systemic risk in the Chinese banking sector (most of the assets they hold are apparently more loans from other Chinese banks - sound familiar?). We can guess where that is going to go eventually.
So in the short term, oil, the lifeblood of the supply chain will de- crease. However, allowing for volatility across the board, the trend long term will probably be upwards.
The CharTered InsTITuTe of LogIsTICs & TransporT 43
PRICE OF OIL