Steep decline in crude oil prices
Lower than expected crude oil demand and higher than expected US shale oil production contributed to an oil price decline not seen since the financial crisis in the autumn of 2008.
The average Brent Blend crude price in the 3rd quarter of 2014 was USD 103.5/bbl compared to USD 109.7/bbl in the 2nd quarter.
The Brent Blend was traded in the USD 94.7-112.3/bbl range during the 3rd quarter of 2014. The highest price was traded on 1 July and the lowest price was traded on 30 September.
The following factors have contributed to the oil price decline in the 3rd quarter:
The crude oil demand has been significantly lower than expected in the 2nd and 3rd quarters. In addition, the IMF has adjusted downward their growth estimates for the global economy for both 2014 and 2015. Crude oil demand is closely connected to the level of economic activity. Therefore the oil demand outlook has also been downward adjusted.
US shale oil production has been higher than expected. In addition, the expectation for future shale oil production has been upward adjusted.
Libyan crude oil production has been more than doubled from the 2nd to the 3rd quarter. OPEC’s oil production has been about 30.5 million barrels a day during the 3rd quarter. This is 0.5 million barrels a day above their quota.
American entry into the battle against the IS in Syria and Iraq resulted in less fear for oil supply outage in South Iraq.
The dollar has been significantly strengthened during the 3rd quarter. A stronger dollar makes oil, which is priced in dollars, more expensive for buyers using other currencies. This can lead to a fall in demand and crude oil prices.
So far in the 4th quarter, the Brent Blend price has continued to fall significantly. From 1 October to 19 November the crude oil price decreased by USD 15.7/bbl to USD 78.5/bbl.
The average oil price so far this year (as of 19 November) is USD 103.9/bbl.
Global production and demand for crude oil
According to the International Energy Association (IEA) Monthly Oil Market Report, the global production of crude oil came to 93.6 million barrels a day in the 3rd quarter of 2014. This is an increase of 1.8 million barrels a day compared with the crude production in the same quarter of 2013.
Also according to the IEA, the global demand for crude oil came to 93.1 million barrels a day in the 3rd quarter of 2014. This is 0.6 million barrels a day higher than the crude oil demand in the 3rd quarter of 2013.
The global crude oil demand in 2014 is now estimated at 92.4 million barrels a day by the IEA. The sum of total non-OPEC and OPEC NGL production in 2014 is estimated at 62.8 million barrels a day. This leaves the estimated “call on OPEC” for crude oil at 29.6 million barrels a day, which is 1.3 million barrels a day lower than in 2013 and 0.4 million barrels lower than in the EIA’s estimate in their August Monthly Oil Market Report.
The global crude oil demand in 2015 is estimated at 93.6 million barrels a day by the IEA. The sum of total non-OPEC and OPEC NGL production in 2014 is now estimated at 64.4 million barrels a day. This leaves the estimated “call on OPEC” for crude oil at 29.2 million barrels a day in 2015.
Find Brent Blend prices, both as a weekly and yearly average, dating back to 1998.