• 3 minutes Nucelar Deal Is Dead? Iran Distances Itself Further From ND, Alarming Russia And France
  • 5 minutes Don Jr. Tweets name Ukraine Whistleblower, Eric Ciaramella. Worked for CIA during Obama Administration, Hold over to Trump National Security Counsel under Gen McCallister, more . . . .
  • 9 minutes Shale pioneer Chesepeak will file bankruptcy soon. FINALLY ! The consolidation begins
  • 12 minutes China's Blueprint For Global Power
  • 3 hours Science: Only correct if it fits the popular narrative
  • 3 hours Crazy Stories From Round The World
  • 11 hours What are the odds of 4 U.S. politicians all having children working for Ukraine Gas Companies?
  • 16 hours EU has already lost the Trump vs. EU Trade War
  • 9 hours China's Renewables Boom Hits the Wall
  • 1 day ''Err ... but Trump ...?'' *sniff
  • 30 mins Do The World's Energy Policies Make Sense?
  • 10 hours Forget out-of-date 'dirty oil' smear, Alberta moving to be world's cleanest oil industry
  • 1 day Pioneer's Sheffield in Doghouse. Oil upset his bragging about Shale hurt prices. Now on campaign to lower expectations, prop up price.
  • 3 hours Impeachment Nonsense
  • 1 day Tesla Launches Faster Third Generation Supercharger
  • 15 hours Water, Trump, and Israel’s National Security
  • 2 days Passerby doused with flammable liquid and set on fire by peaceful protesters

Breaking News:

Russia Plans To Boost Crude Oil Exports

Alt Text

OPEC Output Soars As Venezuela Bounces Back From The Brink

Despite Saudi overcompliance and political…

Alt Text

The $75 Billion Indicator That Might Reveal Aramco’s True Value

Saudi Aramco’s much-anticipated initial public…

Global Risk Insights

Global Risk Insights

GlobalRiskInsights.com provides the web’s best political risk analysis for businesses and investors. Our contributors are some of the brightest minds in economics, politics, finance, and…

More Info

Premium Content

5 Political Risks Facing Oil Markets in 2014

1. Energy revolution in North America shapes global markets

The energy boom in North America will continue to change global energy trends in 2014 and is set to reverse decades’ long trend of oil imports in the U.S. According to the International Energy Agency’s (IEA) latest Annual Energy Outlook report, the U.S. will become the biggest oil producer in the world by 2015.

However, U.S. shale producers will endure challenges in 2014. The decades-old ban on non-refined oil products export could produce a massive glut in oil supply, significantly slashing oil prices and inflicting considerable losses to the industry.

2. Security concerns plagues oil production in Iraq and Libya

The Middle East and North Africa will continue to interest oil analysts, primarily related to political insecurities in major producer countries such as Iraq and Libya. Although both countries are predicting larger oil outputs this year, much will depend on the political situation.

Iraqi government is looking to become the second largest OPEC producer after Saudi Arabia, with an increase of 1 million barrels per day (mb/d) in 2014, but most analysts are predicting production to rise by around 400 000 b/d to reach 2.8 mb/d. The key prerequisite for this scenario lies in the ability of the government to keep sectarian violence at bay, and establish a rational dialogue with the Kurdish and Sunni minorities in the North and the South of the country.

Related article: This Might Be The World’s Lowest-Cost Oil

Libya is struggling to recover its pre-2011 oil production, and the real question is whether the government will be able to establish firm control over the country’s oil exports, primarily from the militia-controlled ports in the eastern province of Cyrenaica, and sustain production from its oilfields disrupted by continuous conflicts between the government, militias and tribal communities. As a consequence, the country is currently producing less than half of its 2012 production of 1.37 mb/d.

3. International agreement brings Iran back to the oil markets

The results of the Geneva negotiations between Iran and the international community could have a strong impact on the oil markets in the second half of 2014. The six-month interim agreement between P5+1 group (five members of the UN Security Council and Germany) and Iran, agreed in October, will come into force on 20 January and if successful will significantly increase Iran’s oil exports.

Iran is planning to increase its current oil output from around 2.5 mb/d to 4 mb/d, but 3-3.5 mb/d within six months of the lifting of sanctions is a more realistic goal. Yet, the political dialogue with Iran is still at an early stage and, considering the potential setbacks, it is difficult to forecast the final outcome.

4. OPEC is facing internal strains due to U.S. shale boom

The oil producers’ cartel will have to cope with new challenges in 2014. U.S. shale oil will continue to cut into the OPEC’s share of global oil production, which will reflect primarily through the decreased exports to the United States and additional downward pressure on oil prices.

In addition, Iranian and Iraqi plans to scale-up their oil production could produce a significant stir within the organisation and escalate tensions with Saudi Arabia. Iran’s recent pledge to increase its production for more than 1mb/d, regardless of the potential for the oil prices to plunge significantly did not go well with the cartel’s informal leader – Saudi Arabia.

At the December meeting in Vienna, the OPEC ministers agreed to keep the output at 30 mb/d for the first six months of 2014. The organisation expects to substitute plummeting exports to the US and accommodate increased production in Iraq and Libya with the forecasted rise in oil demands from Asian markets and China in particular. However, it is realistic to expect that the cartel will slash production at its next July meeting to prevent further deterioration in oil prices.

Related article: Can Italy Double Its Oil Production?

5. Rising oil demand will keep prices at bay

The U.S. Energy Information Agency predicts a 1.2 mb/d increase in 2014 global oil consumption, primarily led by China and other non-OECD countries, while the Paris-based International Energy Agency forecasted a stronger consumption growth in the United States and Europe, which will bring total global consumption to 92.4 mb/d in 2014.

Stronger demand will certainly relieve some of the downward pressures on oil prices, caused by forecasted increases in global supply, however the increased outbound from both the OPEC and non-OPEC suppliers will most likely bring prices slightly below their 2013 levels.

In their latest report, Deutsche Bank analysts forecasted the price of Brent to fall to $97.5 per barrel (bbl) and West Texas Intermediate crude to $88.75/bbl in 2014, compared to 2013 levels of $108/bbl and $97/bbl for Brent and WTI respectively.

By Ante Batovic




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play