The World Bank’s Commodity Markets Outlook (April 2018) adds a feature on oil prices to the usual discussion of short term price movements. Three things are worth noting in this discussion:
– Oil prices have experienced a dramatic slump from 2014-2016 leading to fiscal pressure in a number of oil exporting countries and forcing policy reforms in some cases.
– OPEC countries have had some success in reaching out and cooperating with non-members in establishing supply restrictions. OPEC thus remains a factor in at least establishing a floor for oil prices.
– Fracking industries appear to have been more robust to price declines than expected and US oil supply increased accordingly as oil prices recovered. At one point, the US overtook Saudi Arabia as second largest oil producer. [This resilience of shale oil supplies could set an effective price ceiling for oil prices for the forseable future.]
The latter point on the influence of fracking on oil markets is consistent with the prediction in an earlier IMF blog post on the ‘new normal’ in global oil markets.
World Bank “Commodity Markets Outlook” April 2018 (Special Focus: Oil Exporters, Policies and Challenges, discussion on pp. 13-17)
IMF Blog “A “New Normal” for the Oil Market” 27 October 2016