The first decade of February was characterized with an unstable situation in the world oil market. As noted by some analysts, lately there are some processes linked with the sharp competition increase in the oil market, the main actors of which are state and private oil companies.
Undoubtedly, this situation has its causes and consequences. However, there is an interest in stabilization of the situation. In this sense, the statement of the International Energy Agency (IEA) Nobuo Tanaka, made at a briefing in Paris that “right now there is no emergency in the world oil market” looks logical, although the price reached $ 100 per barrel. However, according to Tanaka, OPEC has to be flexible. The head of the IEA admitted the possibility of intervention in conjunction with OPEC in case of disruptions in oil supplies .
At the same time the head of Libya's National Oil Corporation Shokri Ghanem said that the price of $ 100 per barrel is “justified, given a prolonged fall in the exchange rate of U.S. currency and rising world food prices". He also noted that $ 100 for barrel "does not threaten the process of further growth in the global economy” .
According to the data given in the media, oil quotations in the world markets upon the results of February 10 have been once again multidirectionally changed. At the London Commodity Exchange ICE, March contract for North Sea Brent crude fell by $ 0.95, up to $ 100.87 per barrel, on the New York Mercantile Exchange NYMEX quotation for March futures for WTI crude oil rose by $ 0.02, up to $ 86.73 per barrel .
Specialists acknowledge a serious instability of oil prices, which had begun on February 3. At that time the quote of Brent crude reaches $ 103 a barrel. The experts record the preservation of daily fluctuations in the value of oil contracts in the range of $ 1.5-2.5, and already regard them from the position of average.
However, as some market analysts reckon, the reason for the beginning of fall or rise of oil prices can be any notable event in the world, regardless of its objective impact on the situation in the oil sector.
As an example one can note information from February 10, when rumors about the death of the King of Saudi Arabia bringing the cost of oil futures rising to $ 1.5 per barrel became a kind of momentum, and the subsequent denial of this information has already led to the reverse movement for oil prices - more than $ 2 per barrel.
Relevance of this topic is also preserved on the background of events in Egypt. In the latest period, oil prices rose by $ 0.66, up to $ 101.53 per barrel, WTI grade rose by $ 0.31, up to $ 87.04 per barrel. Despite the fact that Egypt is not an important supplier of oil, investors express concern about the supply of raw materials through the Suez Canal and oil-pipeline SUMED (passing through the territory of Egypt), on which 2.5 million barrels of oil is daily transported. However, if the protests in Egypt will lead to the closure of the Suez Canal and oil-pipeline, the world still has enough of reserved capacities to pump 5.4 million barrels of oil per day. This point of view was expressed by the head of the U.S. Energy Information Administration, Richard Newell at a congressional hearing . Besides, countermeasures have already been taken, and in its turn, OPEC has already announced that it is ready to increase oil production in case of the crisis.
Pessimistic moods associated with the dynamics of increasing proven oil reserves significantly affect the price instability. If touching the reserve capacity to increase oil production, concentrated mainly at OPEC countries, they are still behind the growing demand for oil and the elimination of the imbalances will require a long time.
The graph and table below illustrate the share of OPEC in world oil balance, as well as reserves of countries that are members of the cartel.
According to current estimates, more than ¾ of proven world oil reserves are accounted for the OPEC countries, with major oil reserves concentrated in the Middle East - 70% of OPEC. In recent years, OPEC countries through a series of effective measures in the industry have provided significant supplements of their own oil reserves. As a result, total proved oil reserves of OPEC today is more that $ 1 trillion barrels .
Despite the expected increase of reserve capacity in the medium term, for stabilization and lowering of oil prices, an increase of the capacity of oil refineries in the world is necessary.
I. Uvraimov
CPS Expert
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