The oil market : recent developments and outlook

Abstract

The past three years have seen a radical change in the structure of the oil market, as a result of the deep-seated transformation the US oil industry has undergone and of OPEC’s strategic reaction. This has translated into a substantial reduction in the price of oil. Specifically, this article analyses three key factors behind oil market developments in the past two years: the resilience of US shale oil production, the new turn in OPEC’S strategy to cut output and the slowdown in demand. Further, the medium and long-term outlook for this market is discussed, with the conclusion drawn that a marked rise in prices owing to the foreseeable course of supply and demand is not expected. While some fall-off in supply is contemplated owing to the decline in investment, demand, too, will be contained by greater efficiency in the use of oil-derived fuels and social awareness about their negative externalities