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Oil could reach $ 200 per barrel in a lack of investment

May 5th 2015 at 1:23 AM

The oil market is a cyclical and volatile, especially due to the difficulty with which adapts to application demand. Therefore, a period with a price of 50 dollars per barrel in the medium term is followed by 3-5 years of one with a price of 150 dollars per barrel.

First official warns that possibility is currently on OPEC Secretary General Abdullah al-Badri, who said that it is possible, even a price of 200 dollars per barrel, in the absence of investment in new fields.

"Unless you invest in oil and gas sector will see higher prices of $ 200 per barrel," said yesterday the secretary general of OPEC, without giving a timeframe.

Oil market volatility and cyclicality explanation related to the slow to adapt to demand. Crude oil market has its specific, fixed investment each requiring high initial deposit. Therefore, no matter how small the price of oil, it is not feasible to close a deposit (and moreover it anymore and ecological costs imposed by the state), even if its marginal cost of production is higher than the price obtained for the simple reason that the initial fixed investment is already done. In other words, companies currently operating wells and higher production costs than the market price of crude oil produced in order to reduce losses.

IEA: lower oil prices discourage investment in all types of energy

In fact, the International Energy Agency (IEA) warned on January 21 that the drop in oil prices could discourage investment in all forms of energy.

"OPEC Secretary General expressed legitimate concern, that the current declining investment could put us in a position to Ain future extrege much less oil," says Ole Sloth Hansen, analyst at Saxo Bank quoted by Bloomberg. According to analyst Saxo Bank probably will not reach prices of $ 200 per barrel for "a return of oil to a level of over $ 100 will cause an increase in drilling for shale oil producers in this area can act relatively quickly to higher prices.”

Surplus of 1.5 million barrels per day oil market

"I think the oil return this morning is linked to El-Badri's comments, in particular those relating to the possibility to reach $ 200 per barrel and showing willingness to discuss cartel non-OPEC producing states to balance the market" , says Giovanni Staunovo, an analyst at UBS Group AG in Zurich. "

Currently, there is a surpuls of about 1.5 million barrels per day oil market and OPEC is open to a meeting with countries outside the cartel to address this issue, said El-Badri. In his view, the market could balance rather by a reduction in supply, than by an increase in demand.

Investment down 15%

Investments in oil production will fall by $ 100 billion, or 15 percent this year compared with 2014, said on January 21 at the Forum in Davos, Fatih Birol, chief economist at the IEA, which makes current price of 45-50 dollars per barrel to be a temporary phenomenon.

US oil production rose to 9.19 million barrels per day, on 9 January, the fastest growth in the last three decades as a result of the boom caused by technological developments horizontal drilling and fracturing hjidraulice.

As prices fell, however, the number of platforms operating in the US has been reduced to the minimum the last two years.


"The current price cannot support the non-OPEC production in the last year," said Robert Campbell, director of research petroleum products Energy Aspects Ltd ., based in London Ltd. "Not only is the production of oil US shale, but also oil production in the North Sea, Russia etc. "high marginal production costs, he added.
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