MIEC Final project TT02 by msutejo https://padlet.com/michaelsutejo5/fqvr52kloen1 Team Members: Lim Yu En, Klarice Tan, Michael Sutejo, Tan Jia Ye, Lau Jun Wei en-us 2016-12-16 08:54:32 UTC 2017-01-31 06:43:17 UTC hello@padlet.com https://padlet-assets.s3.amazonaws.com/icons/Shakinghands.png SUPPLY AND MARKET EQUILIBRIUM yuenlimx https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144864489 2016-12-29 07:03:49 UTC https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144864489 MIEC Concepts: michaelsutejo5 https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144956453 -Elasticity of oil
-Demand of oil
-Supply of oil]]> 2017-01-02 08:58:01 UTC https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144956453 Credits: michaelsutejo5 https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144957724 1:http://www.theweek.co.uk/oil-price/60838/oil-price-back-above-55-after-positive-supply-data
2:http://www.hellenicshippingnews.com/opec-projects-demand-for-crude-at-32-6mbd-in-2017/
3:http://www.nber.org/digest/mar09/w14492.html]]> 2017-01-02 09:33:47 UTC https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144957724 1st article: Supply of oil 2016-2017 michaelsutejo5 https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144957791 Since 2014, there has been an oversupply of oil around the world which has led to decreasing prices of oil, which has lead to OPEC (organisation of petroleum exporting countries), agreeing to a cut in supplies in 2017 of approximately 1.8 million barrels a day, in a hope to end the supply glut and ever decreasing prices. Major predictions of oil prices were between us $50 - us $60.

On the 22nd December, prices of oil in US fell to us $55 per barrel, although there has been a forecast by the American Petroleum Institute that there would be a substantial draw on US stockpiles of more than four million barrels which were causing the fifth consecutive week of falling stocks as well as supporting the ongoing price rally.

However, Energy Information Administration (EIA) has instead recorded a 2.3 million barrel increase last week, which has lead to the price drop.

The agreement to cut supplies by the OPEC cartel and Russia is vital to recover from the supply glut of oil since 2014, if the supply of oil was to keep increasing, the supply will far exceed the demand, in which case the implementation of the above would hopefully cause the demand to exceed the supply in the hopes to increase the prices of oil.

As such the following article explains the current oversupply of oil in the world, with the hopes of reducing the glut in 2017, supplies will be cut down by both OPEC and non-OPEC countries.The law of supply and demand defines the effect the availability of a particular product and the desire (or demand) for that product has on price. Generally, a low supply leads to a demand increase and in contrast, the greater the supply and the lower the demand, the lower the price tends to fall. In this case, we can see that due to the increase in supply of oil, the demand for it is reducing.]]> 2017-01-02 09:35:02 UTC https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144957791 DEMAND AND SUPPLY michaelsutejo5 https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144967728 2017-01-02 13:04:51 UTC https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144967728 2nd article: Demand of oil 2016-2017 michaelsutejo5 https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144968104 in this article The Organisation of Petroleum Exporting Countries (OPEC) has stated that the demand for its oil would slightly increase to 32.6 million barrels per day (mb/d) this year from 32.5 mb/d as world oil demand growth has been projected to drop to 1.15 mb/d from 1.24 mb/d.
OPEC noted that “This, combined with the joint cooperation with a number of non-OPEC countries in adjusting production by around 0.6 mb/d, will accelerate the reduction of global inventories and bring forward the rebalancing of the oil market to the second half of 2017.” According to OPEC, the world oil demand estimated at 1.24mb/d, is backed by the fact that the transportation sector reflects low retail prices and better-than-anticipated vehicle sales.

It was stated that Asia and China saw an oil demand growth. In Latin America and the Middle East, oil requirements were lower than thought needed due to a slower economic development and a high level of substitution dampened oil consumption( with the presence of available substitutes, demand would decrease). In 2017, world oil demand is projected to grow by 1.15 mb/d. In OECD, oil demand is projected to rise in OECD Americas, flatten in Europe and continue declining in Asia Pacific.

In the non-OECD countries to growth in economy was said to help increase the overall demand of oil with Latin America and middle east being highlighted.Non-OPEC oil supply in 2016 was estimated to contract by 0.78 mb/d.
With the main contributors to this decrease being the US, China, Mexico, Colombia and other OECD Europe, while growth was anticipated to come from Russia, Brazil, Congo and the UK. Low oil prices led to a decline of 420 tb/d in US oil production. 

In 2017, non-OPEC oil supply is projected to grow by 0.3 mb/d. This is mainly due to higher price expectations for 2017. The main contributors to non-OPEC supply growth are Brazil with 0.25 mb/d, Kazakhstan with 0.21 mb/d, and Canada with 0.17 mb/d. In contrast, Mexico, US, China, Colombia, and Azerbaijan are expected to show the main declines.”

This article explains how demand has a direct relationship with supply. The law of supply and demand defines the effect the availability of a particular product and the desire (or demand) for that product has on price. Generally, a low supply leads to a demand increase and in contrast, the greater the supply and the lower the demand, the lower the price tends to fall. The article has explained how the oversupply of oil as lead to a decrease in demand/ prices of oil in the world.


]]> 2017-01-02 13:11:19 UTC https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/144968104 ELASTICITY michaelsutejo5 https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/145011337 2017-01-03 02:20:14 UTC https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/145011337 3rd article: Elasticity of oil michaelsutejo5 https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/145017698 The elasticity of demand for oil is inelastic as oil is the main source of fuel thus it is inelastic as the change % in demand is lesser than the change % in price in the short run, however in the long run demand oil is elasticity. 
However the low elasticity of price in the short run of demand and supply, with other factors such high amount of existing oil reserves further push the price of oil down despite OPEC has set limit to the amount of oil each OPEC country should produce. But the agreement has not been signed as Iran did not attend the meeting and Saudi Arabia would not sign unless Iran sign it as well.  
The article also state that "the strong growth in demand from China, other newly industrialized economies, and the developing Middle East itself; and the failure of global production to increase. These factors explain the initial strong pressure on prices that may have triggered commodity speculation." Even though newly industrialized economies and developing middle east need large amount of oil for its economics, but the price of oil still continue to drop due to large slurp of oil.
“According to economic theory, three restrictions of the time path of crude oil prices should hold in equilibrium, arising from storage arbitrage, financial futures contracts, and the fact that oil is a resource than can be depleted. These connect the spot price of oil today to the value that market participants expect the price to be in the future. Just as the current price of a stock reflects what people expect about future earnings, making the actual change in stock prices very difficult to predict, the current price of oil should reflect expectations of future fundamentals, making changes in the price of oil hard to predict. The broad movements of the price of oil and oil futures contracts are consistent with these theoretical restrictions.”
The price drop is due to supply is far more than demand, thus the equilibrium is off balance, as the price drop, major producing countries of oil’s revenue drop by at least 1billion usd per day for every 1$ usd/barrel decrease in oil price. In order to increase revenue, oil producing countries started to increase the production of oil in hope to increase in revenue, however the price of oil drops everytime supply of oil increases.]]> 2017-01-03 06:48:25 UTC https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/145017698 RG's Comments gry2 https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/145209011 Looks good.

Analysis is there. Articles look like they'll help you write a decent report.

Time to focus on the market structure of the oil industry.]]> 2017-01-04 08:52:57 UTC https://padlet.com/michaelsutejo5/fqvr52kloen1/wish/145209011