Project #66135 - Economics Demand/supply

Global demand to help oil prices despite U.S. glut-senior Gulf OPEC delegate

 

By Rania El Gamal

 

 

(Reuters) - Stronger-than-expected global oil demand should help support crude prices at around $55-$60 a barrel in the next two months despite some signs of a growing glut (definition: an excessively abundant supply of something)in the United States,‎ a senior Gulf OPEC delegate told Reuters on Tuesday.

 

The comments appear to counter some market forecasts that the U.S. oil glut may push prices to as low as $20-$30 and are a sign that the core Gulf OPEC members remain confident about their strategy of defending market share.

 

"Global demand is definitely growing much stronger than expected. In December, January, and especially February ‎it was beyond what forecasts anticipated," the delegate said.

 

Low oil prices may have encouraged demand to pick up particularly in the United States but also in Asia, the Gulf delegate, who declined to be identified, added.

 

Oil prices are expected to fluctuate around $55-$60 a barrel through April, when they may come under pressure because of seasonal refinery maintenance and rising stocks in the United States, the Gulf OPEC delegate said.

 

International benchmark Brent crude LCOc1 was trading above $55 on Tuesday.

 

Underlining brimming U.S. supplies, crude stocks rose nearly three times as much as expected, as storage at the Cushing, Oklahoma oil hub reached a new record, a government report showed last week.

 

"There are still uncertainties, prices will stay fluctuating around 55-60 dollars," the delegate said.

 

The Gulf OPEC delegate said rising production reflects increasing exports to meet global demand as well as growing local needs.

 

"Increased production is due to two reasons: sales for the international market reflecting stronger demand from customers, not anything else, and local needs with the new refineries online," the Gulf delegate said.

 

Saudi Arabia tends to raise production in the summer months, when the kingdom uses more crude in local power plants to meet air-conditioning needs.

 

Official data showed Saudi crude exports rose in January to 7.474 million bpd, the highest since at least April 2014, while volumes refined domestically remained high.

 

Saudi Arabia was the driving force behind November's refusal by the Organization of the Petroleum Exporting Countries to prop up prices by cutting output alone, in a bid to boost demand and defend market share from rival suppliers.

 

(Editing by Alex Lawler and Dale Hudson)

 

http://www.reuters.com/article/2015/03/24/us-opec-oil-gulf-idUSKBN0MK1WE20150324

 

 

 

Answer the following questions:

 

How would the falling oil prices affect the market for cars? Justify your answer by describing how the economic market model of demand and supply would apply to this case. (Note: you DO NOT have to draw the model in your answer but you may like to do it separately to assist you answering the question)

Over the coming year make a judgement/prediction about what will happen to world oil prices. Justify your answer with reference to theories of demand and supply, the article above and some of your own limited research. (Note: you DO NOT have to draw the model in your answer but you may like to do it separately to assist you answering the question)

 

 

Please remember to reference your answers and provide a reference list at the bottom.

DO NOT exceed 200 word limit by more than 10%

 

Subject Mathematics
Due By (Pacific Time) 04/12/2015 06:00 pm
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