The price of oil for delivery in the future has risen sharply in recent days. Oil delivered in 2016 costs over 138 dollars barrel, Bloomberg news reported. In the last three days, the price has risen by 17 dollars, or 14 percent. The growth is more than three times the rise in the price of oil for delivery today.
Slow production increase
Oil analysts believe there are the long-term, underlying production problems that lie behind the recent price increase. The world’s oil production is rising slowly and it will continue to do so. Estimates suggest that oil production is increased each year with 1 million barrels in daily production. Last week, it was announced that production from Kashagan, a huge oil field in Kazakhstan, will commence only in 2015.
Nationalisation
The high price of oil has led many oil producing countries to tighten the conditions for foreign oil companies. Among other things, the tax rate is consistently jacked up. The Russian Federation is one of such examples. Russia has increased dramatically its taxes on oil impairing the willingness to invest. In addition, a number of oil producers are considered as high risk investments. It’s not so easy to say what will happen to investments in countries such as Iran, Iraq and Venezuela.
Huge demand
At the same time as supply side is struggling, the demand shows no sign of weakness. The economists predicted that the high prices were going to reduce the demand and forcing the oil price to go down. However, this does not appear to happen. According to the International Energy Agency (IEA) the world during the past two years, has experienced an increase in demand of 4 million barrels per day. The demand for oil is increasing in countries like China and India. At the same time, many producers show a lack of ability and willingness to increase their production. (Tirana Times Staff)
