Published on August 19, 2014
The global oil market is expected to be in surplus for 2014, but regional and global geopolitical developments will push up prices.
The political crisis in Libya, declining production from Iran and Iraq and the tensions in Ukraine have added risk premium to prices.
Saudi Arabia has helped maintain a high level of oil output in order to make up for the supply shortage. Production from Saudi in May was at 9.7 million barrels per day, up from 9.6 million in April.
Factors like continued outages and low productivity from other OPEC members has resulted in increased demand for Saudi crude. Experts have thus revised their projection for Saudi oil output in 2014 to 9.7 million bpd from their earlier forecast of 9.4 million bpd.
Supply from Saudi has helped meet demand for its oil but it has been unable to reduce the risk premium on oil prices.
The more the country produces, the lower its spare production capacity becomes, thereby lowering the ability to manage new supply disruptions.
Experts continue to hope that oil prices will decline towards the end of 2014 as demand will decline rapidly. However, the increasing conflicts in the region would only push up oil prices as well as Saudi production.
