So Much for Those Cheap Oil Prices

The supply of global oil is taking a hit, and the US will soon be experiencing its first real test of its ability to avoid the pressures of the oil market. Though newfound shortages have not reached critical levels yet, for now the price per barrel may increase.

The South Sudanese crisis is exploding and has already affected the production from that nation. This would not be such a big deal were it not for the fact that there have been problems with supply in Libya and Nigeria as well. Saudi oil production had already been reduced in the last few months, as demand had been low.

The big question is whether the US has become enough of an oil producer to protect itself against the ravages of global oil disruption. The US has become the world’s largest oil producer of late, in part because other major producers have been reducing their own output. Analysts are betting that traditional oil states will delay their response to what is happening with oil prices to see the global per barrel price rise back to a point where margins improve. In addition, there is a restriction on selling crude outside the US that will negate its ability to contribute to a general increase in the level of oil globally.

-Chris Kuehl, PhD, Armada Corporate Intelligence

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