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The Global Oil Glut - Can OPEC Survive?

GLOBAL OIL GLUT: SAXO CAPITAL MARKETS Can OPEC survive? OIL OPEC The world's biggest oil cartel is struggling to assert its influence on oil markets. The recent slump in oil prices amid a global oil glut has raised questions about the group's future. Who will reign supreme in oil markets? WHAT IS OPEC? 2650 3054 KUWAIT 3113 The Organization of Petroleum Exporting Countries (OPEC) is a cartel of oil-exporting nations set up in the 1960s to stabilise the price of oil by coordinating production levels. The group's founding members were mostly Middle Eastern nations, but it has since expanded to include countries around the globe. IRAQ IRAN 918 1462 LIBYA ALGERIA QATAR 1553 2300 CRUDE OIL VENEZUELA UAE PRODUCTION 2820 526 INCL. LEASE ECUADOR CONDENSATE SAUDI ARABIA NIGERIA (thousand barrels per day) 2367 9693 ANGOLA 1831 Source: OPEC HOW DOES OPEC AFFECT THE OIL PRICE? OPEC member countries produce about 40% of the world's crude oil. 60% of the total petroleum traded globally originates 40% 60% from OPEC member states. By setting production targets, OPEC can actively manage oil production in its member countries. Historically, crude oil prices have increased when OPEC production targets are reduced. In CHANGES IN SAUDI PRODUCTION AND WTI CRUDE OIL PRICES • WTI percent change particular, changes in crude oil production from Saudi Arabia, OPEC's largest producer, frequently affects oil prices. I Saudi production million barrels per day (year-on-year) percent change (year-on-year) 2.5 100 80 1.5 60 40 0.5 20 -0.5 -20 -1 -40 -1.5 T -60 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: EIA The price of WTI crude has tumbled more than 50%, from around $107 a barrel WHY HAS THE PRICE OF OIL BEEN FALLING? in June 2014 to $45 a barrel in January 2015. A combination of oversupply in markets and weak global demand have contributed to the sharp decline in oil prices. The shale revolution, in particular, has seen oil production in the US rise significantly since 2011, and reduced the country's reliance on oil exports. $34.93 $89.93 $95.14 $107.20 $45.31 2009 2011 Jan 2014 June 2014 Jan 2015 Source: CNBC CRUDE OIL PRODUCTION: 10.0 SAUDI ARABIA VS USA (million barrels a day) 6. 5.0 1 Saudi Arabia 1 United States 2009 2010 2011 2012 2013 Source: EIA CAN OPEC SURVIVE? OIL PRICE NEEDED TO BALANCE NATIONAL BUDGETS While some OPEC members like Iran and Venezuela At a key meeting on November 27th 2014 , OPEC announced that have urged cuts to production in order bolster oil prices, it would maintain its output quotas at a collective 30 million barrels a day, despite Brent Crude trading at less than $77 a barrel. At this price, many OPEC members will struggle to balance their books. Saudi Arabia and the other Gulf states are said to have wanted to keep production unchanged. LIBYA $185 SAUDI ARABIA $106 IRAN $131 IRAQ $101 ALGERIA s74 $131 UAE NIGERIA S123 OATAR $60 VENEZUELA $118 KUWAIT $54 Brent crude price $62.17 (26 February 2015) Source: Wall Street Journal OIL INVENTORIES WILL OIL PRICES RECOVER IN 2015? OKLAHOMA CUSHING EXCL. STRATEGIC RESERVES 60.000 The outlook for oil is very uncertain and investors trading this commodity will want to track oil supply very closely. Ole Hansen, Saxo Bank's Head of Commodity Strategy, 40.000 says one way to gauge supply levels is to track shifts in crude oil inventories, which is the amount of oil currently 20.000 stored for future use. "THE INVENTORIES AT THE OKLAHOMA STORAGE HUB WILL REVEAL A GREAT DEAL ABOUT THE CURRENT SUPPLY GLUT IN CRUDE." 2010 2011 2012 2013 2014 2015 Ole Hansen, Head of Commodity Strategy at Saxo Bank. Source: EIA SOURCES OPEC official website: http://www.opec.org/opec_web/en/ US Energy Information Administration, What Drives Crude Oil Prices?: http://www.ela.gov/finance/markets/supply-opec.cfm CNBC, WTI Crude Oil: http://data.cnbc.com/quotes/%40CL.1/tab/2 EIA, Short-term energy outlook: http://www.eia.gov/forecasts/steo/report/global_oil.cfm Wall Street Journal: http://graphics.wsj.com/lists/opec-meeting US Energy Information Administration, Weekly Cushing: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPCO_SAX_YCUOK_MBBL&M=W This infographic has been produced for information purposes only and should not be considered as investment advice. Trading margin products can result in losses that exceed your initial deposit. Saxo Capital Markets UK Limited is a company authorised and regulated by the Financial Conduct Authority, registration Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. 5.48 5.64 7.44

The Global Oil Glut - Can OPEC Survive?

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Saxo Capital Markets’ latest infographic charts the fluctuating fortunes of the Organisation of Petroleum Exporting Countries (OPEC) and the group’s unstable role in today’s oil markets.

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