Crude oil prices fluctuated throughout 2013 and the trend will likely continue next year.
Dubai crude oil moved within a range of US$95-115 a barrel in 2013, while the average price for the year was US$106, down from last year's average of $109. Crude oil prices at the start of the year increased from 2012 on the back of good economic figures, especially from the Chinese and US manufacturing sectors, causing Dubai crude oil to climb to its highest level for the year at $113 a barrel in mid-February.
However, prices continued to be affected by the US fiscal cliff and debt ceiling problems. As well, the new Chinese leader officially assuming office in March caused prices to fall, as markets were concerned that country's new economic reform policy would cause oil demand in the world's second-largest oil-consuming country to decline.
In the second quarter, crude oil prices were heavily pressured by the weakening global economy, especially European debt, particularly severe in Cyprus, and China's weakening economy. This prompted the International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development to cut their 2013 economic growth forecast to between 7.7% and 7.8%. In the second quarter, the world's three main energy institutions, the International Energy Agency (IEA), the US Energy Information Administration and the Organization of Petroleum Exporting Countries (Opec), trimmed their global oil demand forecasts.
But in the third quarter, prices rose steeply due to unrest in a group of major oil-producing countries that raised concerns. Tightening world crude supply was the possibility of US military intervention in Syria; shutdowns of crude oil ports in Libya; clashes in Egypt between the military and supporters of the former president; a pipeline explosion in Iraq; and oil thefts from a pipeline in Nigeria.
However, crude prices did not remain high for long, as unrest in Syria and Egypt eased in late September, relieving market concerns over tight crude supplies in the Middle East. In addition, crude prices continued to fall early in the fourth quarter on the back of the US budget crisis that caused a temporary government shutdown for 17 days and saw 800,000 government employees stop working. This event heightened concern about the US economy and affected crude oil prices. But renewed unrest in Libya saw that country's crude production and exports fall to their lowest levels for the year. Talks aimed at finding a solution to the nuclear problem between Iran and six powerful Western nations in early November reached no clear conclusions, causing prices to rise again. But then later talks on Iran's nuclear programme succeeded, but some of the parties view that achievement as only a preliminary step. It will take at least 6-12 months for Iran's crude oil supply to return to the pre-sanctions level of 2.6 million bpd.
2014 outlook
Dubai crude oil is forecast to average $102 a barrel in 2014, slightly below the 2013 average of $106, due to global crude oil supply growing at a faster rate than demand. Supplies will increase mostly in non-Opec producers such as the US and Canada. However, unrest among main producers such as countries in the Middle East and North Africa as well as natural disasters and other risk factors will cause Dubai crude oil prices to fall slightly and continue to fluctuate throughout the year.
The 2014 crude oil supply is expected to grow at a record rate. The IEA forecasts the 2014 crude oil supply from non-Opec oil producers (as reported this month) will rise by 1.72 million bpd from 2013, derived mostly from fracking in the US. Crude oil production in major Opec producers such as Iraq is forecast to rise by 2 million bpd in 2014 as well if the country finishes restructuring its crude oil industry on schedule.
Global oil demand continues to grow. The IEA forecasts that 2014 world oil demand (as reported this month) will average 92.4 million bpd, up by 1.2 million bpd from 2013.
Prepared by Thaioil Plc. For more information, visit www.thaioilgroup.com