Crude Oil

Following the recovery of oil prices in 2016, the OPEC member states and some outside countries, as Russia, have attempted to reduce supply by 1.8 million barrels per day (90 million tonnes/year) to counteract the surplus caused mainly by the increase in shale oil production in the USA, where Exxon, Shell and Chevron have significantly involved. History or cycle of oil price developments in the recent decades shows that extremely high levels of crude oil prices do not persist in the long term, and any producer that relies on super-optimistic price forecasts will certainly get bankrupt. Goldman Sachs warns that a further decline in prices may come in the next three years, triggered by a new wave of increase in crude oil supply resulting from megaprojects planned several years ago. On the other hand, OPEC cartel, which acted as a regulator of world supply, has long exceeded the average life of an international cartel, and if it does not act jointly, it may complete its work. There are uncertain and unclear perspectives on oil supply/demand balance and oil price developments in the short and medium term, the encouraging predictions of Citigroup, Barclays, Again Capital and Bloomberg on rebalancing the market are in contradiction with Goldman Sachs estimations. In the long run, the scenarios launched by the International Energy Agency in November 2016, such as the Current Policy Scenario and the New Policy Scenario, may be judged to be completely unrealistic, especially in light of China's and India's recent announcements on widespread introduction and using of electric cars.