Venezuelan President Nicolas Maduro has said that the price of oil should be a minimum of $70 a barrel in order for the necessary oil investments to be made. He added: “If that’s not the case, take note, investments will fall, and stocks will not be replaced by investment, and in one year we will have a price of $200”.
When the oil price halved last year the cause was obvious: Saudi Arabia’s decision to increase its share of the global oil market by expanding production. But what accounts for the further plunge in oil prices in the last few weeks to lows last seen in the aftermath of the 2008 global financial crisis, and how will it affect the world economy?
In the first half of 2015 Saudi Arabia exported more than half its crude exports to Asia. The Kingdom increased production and kept its export levels high enabling it to maintain its market share in the countries in question. However, long-term trends in Saudi Arabia’s domestic energy sector and competition from other oil exporting nations may result in a decline in the Kingdom’s global crude oil market share.
Average crude prices: Brent $47/b in August 2015, a 10% decrease from July; Crude oil forecasts: Brent $54/b in 2015 and $59/b in 2016, and WTI prices to average approximately $5/b below Brent. U.S. oil production fell 140,000 b/d in August when compared to July, and expected to decline through mid-2016. Natural gas working inventories 18% higher than a year ago.