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5 Political Hot Issues to Watch in 2014

Top 5 Oil Issues of 2014

Given the volatility of the current political market, it should come as no surprise that 2014 brings hot button issues that could pose risks to the oil industry. Being aware of these political happenings now can help you keep them on your radar so they do not catch you by surprise. After all, the popular Boy Scout motto, “Be Prepared,” applies strongly in this case. The top five topics you need to be aware of are outlined below.

1. Iran is Welcomed Back to the International Oil Market

As a result of the Geneva negotiations between the five permanent members of the United Nations Security Council – the United States, the United Kingdom, France, the Russian Federation, and China – along with Germany, an agreement was reached in October 2013 that cleared the way for Iran to ramp up its production of oil. It became effective on January 20, and, though it has seen a few bumps, if it is ultimately successful, this agreement could result in a significant boost in the amount of oil that Iran exports. This influx is likely to affect the prices that American oil will fetch in the marketplace.

2. Libya and Iraq Continue to Face Security Concerns

Given the volatility of the North African and Middle Eastern political situations, industry analysts continue to keep a sharp watch on the area. Iraq wants to position itself as the second most prolific OPEC oil producer in the world, behind only Saudi Arabia. They plan to do so by increasing their production to an additional one million barrels per day in 2014. Unless Iraq can keep sectarian violence to a minimum and negotiate with Sunni and Kurd minorities in the country’s South and North, analysts predict the increase in production will only be an additional 400,000 barrels, making a total of 2.8 million barrels of crude oil each day.

3. Predicted Increase in Demand Might Not Translate to an Increase in Price

Increase In Demand Doesn't Mean Increase In Price
International Energy Agency, based in Paris, speculates that strong growth in consumption across Europe, as well as the United States, will push demand to new heights. Along with a 1.2 million barrel a day increase in demand in consumption across the globe, largely led by China, and other nations that are not members of the Organization for Economic Co-operation and Development (OECD) as predicted by the United States Energy Information Agency, the demand is expected to jump to 92.4 million barrels per day. Though this seems like it should equal an increase in price due to the increase in demand, with more countries gearing up their oil production, prices are likely to dip in response.

4. US Shale Boom Strains OPEC

This is another development that seems like it is good for the US oil industry, but will likely wind up driving down prices. Because the increase in US shale oil will probably diminish OPEC’s cut of the worldwide oil production, prices on oil will likely take a tumble. With both Iraq and Iran pledging to increase their oil production in 2014, Saudi Arabia was not pleased. These sparring countries could bring an increase in the uncertainty of oil production outputs for this year ultimately pressuring prices downward.

5. North American Energy Revolution Shapes Market Trends

The International Energy Agency (IEA) predicts, in its report, Annual Energy Outlook, that the US will become the world’s largest oil producer by 2015. That said, the influx of oil production, particularly by shale oil producers, could result in a flood of supply into the market. This could effective put downward pressure on the pricing structure of the US oil industry.

Some analysts, such as those from Deutsche Bank, released their predictions that West Texas Intermediate (WTI) crude could drop in price from a high of $97 a barrel in 2013 to $88.75/barrel in 2014. Brent could see a fall in price from $108/barrel in 2013 to $97.5/barrel in 2014. These predictions and events should be kept in mind as the year moves forward.