The price of oil will go up as oil wells play out and investment in exploration, drilling and new wells falls off. The price of oil will also go up if Saudi Arabia or the USA cut back on production. And, the price of oil will rise when demand goes up again. However, if and when Iran completes a deal to curtail its nuclear ambitions the country with the fourth largest oil reserves in the world will help flood the market with cheap crude. The Wall Street Journal writes about signs of reduced oil production.
The U.S. and the Organization of the Petroleum Exporting Countries have flooded the world with crude oil, sending prices tumbling. But the abundance has overshadowed declining production in areas-from Colombia to Norway to northern China-that experts consider vital to long-term supply growth.
Confronted with the plunge in prices, companies in these regions are delaying and canceling projects. Across the world, just six major oil projects received the green light in 2014, compared with an average of more than 20 a year from 2002 to 2013, according to Deutsche Bank.
The International Energy Agency said Friday that non-OPEC supply growth would “grind to a halt” in 2016, with output due to fall in Russia, Mexico, Europe and elsewhere.
It can take years from discovery of new oil reserves to production. As oil prices have fallen there is less money to find and develop reserves and less incentive. When will the price of oil rise? It might be as early as next year, unless Iran agrees to a limited nuclear development program.
China, Greece and Iran
China is a major importer of raw materials including crude oil. The slowing Chinese economy reduces the demand for oil and the price of oil. CNN Money reports that China is expect to have its worst growth since the crisis of 2008.
Looking ahead, economists expect to see 6.95% annual GDP growth for this year, and even slower expansion at 6.5% in 2016.
There’s no question about it: After years of breakneck growth, China’s economy, the world’s second-largest, is now slumping. Economists say the government has no choice but to continue working to stimulate the economy, especially as data points continue to disappoint and risks keep piling up.
When will oil prices rise? One of the key factors is when China’s economy picks up speed again. Likewise the Greek debt crisis is a plague on the house of Europe and needs to get fixed to help bring European growth back on line. The Iranians have been suffering under economic sanctions imposed by Western powers who want Iran to get off the path to developing nuclear weapons. Talks are at a critical phase right now. Oil prices are currently down as traders expect a deal that will allow Iran to export again. CNN reports that oil prices tumble as Iran deal appears possible.
Crude prices dropped by 1.6% to around $52 a barrel as investors reacted to the potential new supply.
Iran has plenty of oil it can export the minute a deal is signed — there are an estimated 30 million barrels of crude in storage, according to FACTS Global Energy, an industry consultancy. An agreement could also pave the way for new foreign investment by international oil and gas giants like Royal Dutch Shell and France’s Total.
When will oil prices rise? It may be quite some time before oil prices go up substantially and in the near term we may see much lower oil prices.