The oil market has been stung of late by the volatility that most pundits thought will not arise. The basis for the optimism of market analysis was based on the sustained levels of production curbs by OPEC and the newly aligned non-OPEC members like Russia.
Over the last couple of weeks, the price range of the average OPEC basket has been swinging between a low of $43 and a high of $ 48. While a few traders have opined that that bad market mood could pull down the prices, the see-saw has continued.
Here are a few reasons while oil futures remain attractive:
OPEC Members Production Curbs
While a few oil producers like Nigeria and Iraq have ramped up production, the aggregate of their increases only amounts to 300,000 barrels in added output.
This increased level is not enough to swing the prices below the $40 mark. The intra-OPEC production curbs were thought to be at 96 percent as at June 2017 but other allies have recorded up to 106 percent curb.
Shale Oil Eclipse
The American shale oil producers have become the latter-day price modulators. However, their impact can only be timed. When oil prices swing past the $50 mark, shale oil producers have an incentive to unstop their oil flow.
The average price per barrel for shale oil production peaks at $50 for large output levels, whilst only a few players can turn a profit at this mark.
The annual output of Tesla is expected to hit 300,000 per annum in the next twelve months. In market terms, that is still a long way off. Industry experts expect that the full impact of EVs will shave off 270,000 barrels off the daily demand by 2020!
Global Strategic Storage
The outlook by analysts pegs the present data at fewer than 200 million barrels per day. While the estimates cannot exactly be defined, it is however sometimes affected by unreliable updates.
The Iranian national storage is believed to have dipped by 50 million barrels since the fall of 2016. It is believed that on a year-on-year basis, Q2 2017 global storage levels are at a level 500,000 lesser that the previous year.
Demand and Supply Equilibrium
The average global supply spike is presently estimated to outstrip daily demand by only 100,000 barrels. Empirical data in real market stats show a supply deficit in the region of one million barrels per day.
Oil Futures Profitability
It is still a robust market to play in at least for 2017. Depending on where you choose to place your stake, you can be sure the average price per barrel is not going rock –bottom just yet!