Fundamental Analysis of Oil Price Movements in 2010s

Abstract

The oil market has proved its cyclical nature once again in recent years. After several years with price hovering above 100 USD/bbl, increased investments and consequential excessive supply caused oil prices to fall and OPEC started with active supply management. This article examines the supply and demands factors that determine the current lack of success of OPEC’s activities. We think that OPEC’s need for immediate increase in budget revenues helped the shale oil producers to increase their activity which results in current protracted period of low prices, with potential result of another boom cycle. We do not expect that demand will decrease in large enough scale to prevent another price spike in coming years as a result of current environment of low exploration and production investments.