The outlook of most of the commodity markets, particularly crude oil, is
dominated by the supply glut conditions. There has been an excess build-up in
the production capabilities of non-OPEC energy producers, led by Canadian heavy
oil producers and US shale. Saudi Arabia, in a bid to maintain its dominance and
low-cost producer in OPEC's status, has boosted its oil output in order to
undercut financial feasibility of higher-cost producing firms and regions.
Additionally, there will be an added boost in the global production from Iran
and other nations in the Middle East and Africa that want to expand
revenues.
Unsold crude inventories are at a record on land and on sea in
tankers. Even though oil output in the US is being cut, much larger cuts are
will be required to rebalance the oil market. On the other side, there is an
increase in demand for energy products, led by strong demand from the US, China
and India. However, the inflection point is expected to take place later and not
sooner, and will need a much stronger global economic growth to raise crude
prices higher on a more sustained basis. There is always the possibility that
several geopolitical risk factors might raise prices; however, they will more
likely add to the chronic instability.