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According to the International Energy Agency (IEA), in 2012 over 64% of world oil production came from the top ten countries: Russia 544 Mt (13%), Saudi Arabia 520 Mt (13%), United States 387 Mt (9%), China 206 Mt (5%), Iran 186 Mt (4%), Canada 182 Mt (4%), United Arab Emirates 163 Mt (4%), Venezuela 162 Mt (4%), Kuwait152 Mt (4%) and Iraq 148 Mt (4%). Total oil production was 4,142 Mt, up 3% from 4,011 Mt the previous year.[2]

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OIL Patches Brace for Financial Rekoning

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OIL Patches Brace for Financial Rekoning

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Oil Patches Brace for Financial Reckoning as in the recent months the oil prices have shown to be plummeting due to the recent surge in supply from Iran. As such this has landed many of US oil companies to be facing financial reckoning . Especially for smaller drillers that are now bracing for cuts to their credit lines in October as banks re-evaluate how much this companies are worth. With such low prices for oil even bigger oil companies are struggling to make a profit.

Currently there is uncertainty on where the oil prices will be heading in the future as the demand for crude oil continues to increase however with the surplus of supply from all of the oil companies around the globe it is hard to determine the future of oil prices.

Currently there is so much supply that US oil companies are declaring bankruptcy and shutting down as US oil production drops by 3%, it is harder for companies now to profit even with the increasing demand as the build up surplus from Iran will take a long time to deplete. Thus crude oil prices show little sign of rebounding in this and the year to come

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Oil Patch Braces for Financial Reckoning

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The oil patch is expected to finally face a financial reckoning, with carnage occurring as early as this month. One trigger: Smaller drillers are bracing for cuts to their credit lines in October, as banks re-evaluate how much energy companies' oil and gas properties are worth.

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Supply: Non-OPEC

Oil production from countries outside the Organization of the Petroleum Exporting Countries (OPEC) currently represents about 60 percent of world oil production. Key centers of non-OPEC production include North America, regions of the former Soviet Union, and the North Sea.
Changes in non-OPEC production can affect oil prices forecast million barrels per day change (year-on-year)price per barrel (real 2010 dollars)

Country | Production (bbl/day)
1 | United States | 13,973,000
2 | Saudi Arabia (OPEC) | 11,624,000
3 | Russia | 10,853,000
4 | China | 4,572,000
5 | Canada | 4,383,000
6 | United Arab Emirates (OPEC) | 3,471,000
7 | Iran (OPEC) | 3,375,000
8 | Iraq (OPEC) | 3,371,000
9 | Brazil | 2,950,000
10 | Mexico | 2,812,000
11 | Kuwait (OPEC) | 2,780,000
12 | Venezuela (OPEC) | 2,689,000
13 | Nigeria (OPEC) | 2,427,000
14 | Qatar (OPEC) | 2,055,000
15 | Norway | 1,904,000
16 | Angola (OPEC) | 1,756,000
17 | Algeria (OPEC) | 1,721,000
18 | Kazakhstan | 1,719,000
19 | Colombia | 1,016,000
20 | India | 978,000
21 | Oman | 951,000
22 | Indonesia (OPEC) | 911,000
23 | United Kingdom | 906,000
24 | Azerbaijan | 856,000
25 | Argentina | 715,000
26 | Malaysia | 697,000
27 | Egypt | 667,000
28 | Ecuador (OPEC) | 557,000
29 | Libya (OPEC) | 516,000
30 | Australia | 478,000
31 | Thailand | 422,000
32 | Vietnam | 316,000
33 | Turkmenistan | 276,000
34 | Equatorial Guinea | 269,000
35 | Sudan and South Sudan | 262,000
36 | Congo, Republic of the | 259,000
37 | Gabon | 240,000
38 | Peru | 180,000
39 | Denmark | 171,000
40 | Italy | 169,000
41= | Germany | 160,000
41= | South Africa | 160,000
43 | Japan | 137,000
44 | Yemen | 127,000
45 | Brunei | 124,000
46 | Trinidad and Tobago | 116,000
47 | Ghana | 106,000
48 | Romania | 104,000
49 | Chad | 103,000
50 | Pakistan | 98,000
51 | Uzbekistan | 85,000
52 | Cameroon | 81,000
53 | South Korea | 79,000
54 | Timor-Leste | 76,000
55 | Bolivia | 67,000
56 | Ukraine | 66,000
57= | Bahrain | 64,000
57= | Netherlands | 64,000
59= | France | 61,000
59= | Turkey | 61,000
61 | Tunisia | 59,000
62 | New Zealand | 50,000
63 | Cuba | 49,000
64 | Spain | 40,000
65 | Poland | 39,000
66 | Ivory Coast | 37,000
67 | Papua New Guinea | 34,000
68 | Syria | 33,000
69 | Belarus | 32,000
70 | Austria | 27,000
71 | Philippines | 26,000
72 | Hungary | 25,000
73 | Taiwan | 22,000
74= | Albania | 21,000
74= | Mongolia | 21,000
74= | Myanmar | 21,000
74= | Serbia | 21,000
78= | Congo, Democratic Republic of the | 20,000
78= | Niger | 20,000
78= | Singapore | 20,000
81 | Croatia | 18,000
82= | Chile | 15,000
82= | Virgin Islands, U.S. | 15,000
84= | Guatemala | 14,000
84= | Suriname | 14,000
86= | Belgium | 13,000
86= | Estonia | 13,000
88 | Sweden | 12,000
89 | Czech Republic | 11,000
90 | Finland | 10,000
91= | Lithuania | 9,100
91= | Slovakia | 9,100
93 | Greece | 8,700
94 | Portugal | 7,100
95 | Mauritania | 6,000
96 | Israel | 5,800
97 | Morocco | 5,100
98 | Bangladesh | 4,800
99 | Switzerland | 3,900
100 | Bulgaria | 3,400
101 | Aruba | 2,800
102 | Jamaica | 2,100
103 | Paraguay | 2,000
104 | Belize | 1,800
105 | Netherlands Antilles | 1,500
106 | Uruguay | 1,200
107= | Barbados | 1,000
107= | Georgia | 1,000
107= | Latvia | 1,000
110 | Ireland | 900
111 | Puerto Rico | 700
112= | Costa Rica | 300
112= | Slovenia | 300
114= | Jordan | 200
114= | Malawi | 200
114= | Tajikistan | 200
114= | Zambia | 200
118= | Ethiopia | 100
118= | Hong Kong | 100
118= | Zimbabwe | 100

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The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to become the Founder Members of the Organization.

These countries were later joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975) and Angola (2007).

From December 1992 until October 2007, Ecuador suspended its membership. Gabon terminated its membership in 1995. Indonesia suspended its membership in January 2009, but this was reactivated from 1st January 2016.

This means that, currently, the Organization has a total of 13 Member Countries.

The OPEC Statute distinguishes between the Founder Members and Full Members - those countries whose applications for membership have been accepted by the Conference.

The Statute stipulates that “any country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of Member Countries, may become a Full Member of the Organization, if accepted by a majority of three-fourths of Full Members, including the concurring votes of all Founder Members.”

The Statute further provides for Associate Members which are those countries that do not qualify for full membership, but are nevertheless admitted under such special conditions as may be prescribed by the Conference.

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Choo Wei Xiang, Jasline Soh, Xu Cheng Yu, Brandon Goh Cheng Rong, Tan Joshua

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(1) Good, on the right track. Develop your analysis further to show more depth. Incorporate the relevant diagrams, for example, shifts in the Demand and Supply curves.

(2) Need to have additional economic concepts. Bring in Market Structure as you have planned in your note to the group.

(3) Can also do some research on OPEC

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DEMAND

The Demand for oil is booming globally. Especially in United States. The oil demand had increased significantly in 2015 when compared to 2013.

This is cause by the fall in oil prices. The fall in oil prices is cause by the surplus of oil supply in Iran.

But the oil prices could increase again soon as the demand for oil is increasing. The booming demand for oil can cause a shortage of supply, hence to boost supplies , prices must go up to increase productivity.

This will cause a upward movement in the supply curve and the demand curve to have a upward movement too.

Ultimately, the key factor that might had caused the oil prices to fall at the first place may be due to a non-price determinant factor , Factors/resources price and the expectation of the producer.

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Gulf oil producers delay field work, see weaker 2016 prices -sources

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Gulf oil producers delay field work, see weaker 2016 prices -sources

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SUPPLY

Suppliers of gulf oil expect future price of gulf oil to fall in the future, especially when sanctions in Iran will be lifted. Without the sanctions, Iran will then be able to export more oil to more countries. Therefore, the increase of oil supply by Iran in future will cause a drop in price of gulf oil.

This is because when supply increases, supply will be more than quantity of oil demanded, there will be a surplus of oil, causing the price of oil to drop.

The expectations of gulf oil producers is that price of the oil will fall in future, so they will sell more gulf oil now before the price actually falls. In a demand and supply diagram, the supply for gulf oil increases today, and the supply curve for oil will have a rightward shift.

This explains why Gulf oil producers are postponing field work maintenance for oil rigs and pipes, because such maintenance is not seen as necessary to maintain production or safety of production. Instead, the main goal of these oil producers at this moment is to save effort on upgrading, and spend the time, money and effort to produce more oil to the market before oil prices fall and these producers suffer a loss.

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Unrelenting' supply amid oil demand growth: IEA

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Unrelenting' supply amid oil demand growth: IEA

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Friday, 11 Dec 2011

Demand & Supply

OPEC chose to continue producing at record levels to protect its market share.

The IEA said that OPEC had the biggest "lion share' which caused the growth in oil supplies.

On Friday, both benchmark Brent crude and WTI were trading below 40 dollars a barrel which was below market price.

This is because there was a surplus when the supply of oil by OPEC exceeded the demand of oil. As a result of the surplus, it has resulted in a downward pressure on price.

Illustrated in a demand-and-supply diagram, the supply of oil would have increased and shifted right more than the demand curve for oil. The surplus between demand and supply of oil causes oil prices to fall to the equilibrium market price, which is lower than the original price.

This explains why oil prices have tumbled over the last 18 months, from a high of $114 last June to their current levels on a glut in supply outpacing demand.

The price crash was exacerbated by the 12-member oil producing group, which is led by Saudi Arabia, deciding not to cut production to support prices. As Saudi Arabia joins OPEC in increasing the supply of oil, oil prices are therefore predicted to fall even further when supply continues to increases at a rapid rate.

The prediction of continual increase in oil prices is supported by On Friday, Russian's deputy finance minister's stark warning of $40-$60 oil "for the next seven years," Reuters reported.

http://www.cnbc.com/2015/12/11/unrelenting-supply-hits-oil-demand-growth-iea.html

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*How did the curve shift

*What happens to the final equilibrium price

*DEPTH & APPLICATION OF CONCEPTS

*Determinant of demand/supply at work, how did it impact

*Based on numerical evidence from article

*Include market structure in padlet next time (IMPT)

~JAS~