Plunging oil ‘to spark more global tensions’ in 2015

Tuesday, December 16, 2014
By Paul Martin

Caroline VARIN

United Kingdom – The oil market faces an uncertain outlook in 2015 as tumbling prices resulting from global oversupply stoke geopolitical tensions in key producers of crude, analysts say.

Oil prices have lost around half their value since June, punished by abundant supplies, a stronger dollar and weak demand in the faltering world economy.

Losses accelerated in late November when the Organization of Petroleum Exporting Countries (OPEC) — which pumps out one-third of the world’s oil — decided against cutting its output despite the supply glut.

Prices subsequently hit a series of five-year lows in London and New York, rocked also by 2015 oil demand forecast downgrades from both OPEC and the International Energy Agency watchdog.

At the OPEC meeting on November 27, kingpin Saudi Arabia and other Gulf monarchies opposed a cut to the cartel’s daily output ceiling of 30 million barrels.

Analysts say they want lower prices, even if it slashes incomes, to counter the rise of US shale oil — which is more expensive to produce and eats into OPEC’s market share.

However at the other end of the scale, oil producers Venezuela, Nigeria, Iran, Iraq and Russia are desperate for prices to rise so they can balance their books and salvage their teetering economies.

– Social, political turmoil –

In Venezuela, plunging crude oil prices have already sparked social unrest and political uncertainty.

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