By Isaac Cohen*
After falling to $26 per barrel last February, oil prices have reached $50 and the question is if this is sustainable. On the supply side several factors contributed to doubling the price.
Oil production in the United States is estimated to decrease by one million barrels per day by the end of the year, from the peak of 9.7 million barrels per day reached in April 2015. Production has been disrupted by political events in Nigeria, causing an export reduction of between 600,000 and 800,000 barrels per day.
Also, wildfires in Canada have curtailed production of about one million barrels per day. Therefore, excess production of 1.3 million barrels per day has been eliminated. Finally, there is concern that the Venezuelan chaos will begin to hurt oil exports, which has not been the case until now. Even so, there is still no concern of a shortage of oil because inventories, both private and strategic, amount to more than 4.5 billion barrels.
On the demand side several factors are also contributing to the increase in crude oil prices. For instance, for the first time in four years, the Paris based International Energy Agency estimates that, in this year’s first quarter, India’s demand for refined oil products reached 400,000 barrels per day, more than 353,000 barrels per day in China. Also, Chinese imports of crude oil in May were 39 percent higher than a year before.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.