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The crude oil price has been falling considerably – see also our 5-year chart. The world crude oil market is experiencing a production surplus of almost 3%. While demand is growing at a fairly stable pace supply is growing even faster. Shale production is developing very fast and has been experiencing huge efficiency gains – mainly in USA. OPEC led by Saudi Arabia is fighting back by simply exporting more output causing prices to plunge. And there is more supply capacity in Iran, Syria, Lybia that is not being utilized yet due to sanctions and civil war.

Erwin Lasshofer and his INNOVATIS see the capability and a strong motivation of the biggest players to further increase their output. For now the game has changed. The OPEC cartel has lost some pricing power. In a trial to defend market share they utilize spare capacity to increase production. Thus oil prices have lost a strong source of support for the moment.

Furthermore fuel storage capacities appear to be exhausted. Thus the key question is at which price levels supply decreases and/or demand increases so far that production surplus drops to zero or even turns negative. The market is just looking for its new equilibrium. And the biggest players such as Saudi Arabia or USA will suffer less from the oil revenue loss than their geopolitical opponents such as Syria or Russia respectively – which appear to be a very welcome side effects.

For more details see our analysis:

http://www.innovatis-suisse.ch/the-world-is-drowning-in-crude-oil/