Here’s an interesting graphic on how the oil production and prices.
Source: St.Louis Federal Reserve
Source: St.Louis Federal Reserve
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Adding to the above Article:
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There are five major factors in oil pricing
- Production
- Demand (these two generally does not change much and reliable forecasts are available)
- Spare capacity ( probably the most important for the prices over medium term. The country or entity with higher spare capacity can become swing producer therefore control prices by raising or cutting production immediately)
- Inventory
- Geopolitics (majority of oil production is controlled by govts who have other motives than just profits. For example Saudis will go for great lengths to balance oil market just to force sanctions on Iran)
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You need to capture the (demand) of oil to make sense out of prices in the graphic, not just production (supply). The graphic is inconclusive … correct me if I am wrong?
Yup. Makes much more sense now … Clearly, with steady demand and constant conventional oil production rate … Shale has totally disrupted the prices … I guess it is more relevant to track Shale production dynamics than anything else at the moment … Nice. Thnx.
In the near and medium term, geopolitics will dictate oil prices. Being a major importer of oil, Indian Rupee and stock markets will likely go thro a roller coaster ride as well.
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