$60 Oil Next Year

Oil will trade between $50 and $60’s a barrel next year as non-OECD demand grows

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The oil market will break through the $50 barrier and move towards $60’s next year, as global oil demand grows and the excess production declines.

The increase in price may be aided by the efforts of the Organisation of the Petroleum Exporting Countries (OPEC), but this is not a necessity. Countries outside of the Organisation for Economic Co-operation and Development (OECD) will overtake developed nations as the top oil consumers. 

The future of oil demand

Last year India eclipsed Japan as the third largest oil consumer behind China and the United States. The future of oil demand and the consequent rise in price will come from the East.

China is currently transitioning from a manufacturing to services based economy, which has and will see a decline in demand. However the slack will be made up by the advancement of the Indian economy. The country’s demand for crude during the first quarter of 2016 grew at the fastest pace in a decade, up nearly 8% from same period last year. Current projections see the Republic being the largest consumer globally through to 2040.

Concerns around the supply glut will dissipate as growing demand soaks up excess crude with or without the actions of OPEC.

The sway that OPEC had over the oil market is waining as political infighting has tarnished the reputation of the organisation. Instead of seeking an amicable agreement between all members on the future direction of the market, the de-facto leader, Saudi Arabia, has been intent on sabotaging Iranian ambitions to become a dominant force in oil supply. The actions of the oil rich Kingdom by fighting proxy wars in the Middle-East against Iran and deflating the prospects of a production freeze agreement have been detrimental to all parties.