Oil Stability

By Isaac Cohen*

Oil prices remain stable at around $100 per barrel, despite severe cold weather in North America, the confrontation between Ukraine and Russia and political turmoil in Venezuela. The explanation can be found in three factors identified in the monthly report issued last week by the Paris based International Energy Agency, the organization which groups the biggest oil consumers.

The draw down in oil inventories caused by the severe and long winter in North America has been compensated by increased domestic production, due to the utilization in Canada and the United States of new drilling and extraction technologies. Oil production in the United States increased from a low of 5 million barrels per day (mbd) in 2008 to over 8 mbd in 2013. As a consequence, US net oil imports decreased from 12.5 mbd in 2005 to almost half, 6.3 mbd in 2013.

Another mitigating factor is a surprising increase of 500,000 mbd in Iraq’s crude oil production, to an average daily production of 3.6 mbd, a level not seen in 35 years. Oil exports from Iraq increased in February to 2.8 mbd.

The third factor is an increase in crude oil exports from Iran, to 1.16 mbd, in both January and February, exceeding the limit imposed by the interim agreement on Iran´s nuclear program.

True, all this may change if the confrontation in Crimea escalates, or if the turmoil in Venezuela hurts oil production.

*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC. 

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