The Stability of World Oil Markets, and the Potential For Oil Shocks
What are the main market characteristics that determine the stability of world oil markets. Given four potential scenarios (quadrants) of relative change—rising storage levels, rapidly rising storage levels, falling storage levels, and rapidly falling storage levels—what are the market characteristics that determine which quadrant we are in. Is there a stable path between quadrants?
In the context of the current status of world oil markets, we are holding a workshop at KAPSARC on February 27th to answer the following questions: 1) What are the 📷key market characteristics that determine the stability of world oil markets? 2) How high do inventories have to be before the world oil markets become over-supplied? 3) Are the current levels of inventories so high that we are at risk of another downward price shock?
I would love to hear your ideas?
If you are interested in attending the workshop please click on the link below.
https://lnkd.in/e7sgA6h
According to Cory Mitchel, there are four major market forces: Government, International Transactions, Speculation and Expectation, Supply and Demand. These factors can cause short- long term fluctuations. While all of these major factors are categorically different, they are closely linked to one another. Government mandates can effect international transactions, which play a role in speculation and changes in supply and demand can play a role in each of these other factors.
Based on the EIA database, Near-record crude oil inventories (around 535 million barrels) could pressure crude oil prices. US crude oil inventories are the second-biggest bearish catalyst for crude oil prices after US crude oil production. in other words, if the increase in US crude inventories is more than expected, it implies weaker demand and is bearish for crude prices. The same can be said if a decline in US inventories is less than expected.
There is quite a bit of speculative evidence of the relationship between higher (or lower) than expected changes in inventories and oil prices, but the exact relationship tends to change given the level of stockpiles --low or high--and the level of geopolitical tension...
https://www.cnbc.com/2019/12/27/oil-markets-us-consumer-spending-in-focus.html
Rising short term floating storage builds and OECD inventories above the 5 year moving average are helping to turn speculative attention over to Russia and OPEC for production cuts to stabilize world oil prices. This should be reflected in price risk to the downside....
"OECD industry stocks held largely steady in December at 2 915 mb as a build in product inventories more than offset lower crude holdings. Total oil stocks stood 26.4 mb above the five-year average and covered 61 days of forward demand. Preliminary data for January show inventories building in the US and Japan while falling in Europe. Short-term floating storage of crude oil built 7.7 mb in January to 76.2 mb, most of which is Iranian oil."
https://www.iea.org/reports/oil-market-report-february-2020
https://oilprice.com/Energy/Energy-General/Russia-Is-The-Critical-Factor-In-Oil-Markets-Right-Now.html
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