FACTOR THAT INFLUENCE OIL PRICE 2015

             Malaysian government had decide to stop subsidizing oil by introduce managed float system started from 1 December 2014. That is because malaysian government's decision had been influenced by the trend in world crude oil price. UK Energy Regulation Commission and the International Energy Agency predicts a decline in crude oil price trend will be continues.There are many factors that are effect the oil price and we are going to discuss some of them:

1) China’s Economy. China is the second largest consumer of oil in the world and surpassed the United States as the largest importer of liquid fuels in late 2013. More importantly for oil prices is how much China’s consumption will increase in the coming years. According to the EIA, China is expected burn through 3 million more barrels per day in 2020 compared to 2012, accounting for about one-quarter of global demand growth over that time frame. Although there is much uncertainty, China just wrapped up a disappointing fourth quarter, capping off its slowest annual growth in over a quarter century. It is not at all obvious that China will be able to halt its sliding growth rate, but the trajectory of China’s economy will significantly impact oil prices in 2015.

2. American shale. By the end of 2014, the U.S. was producing more than 9 million barrels of oil per day, an 80 percent increase from 2007. That output went a long way to creating a glut of oil, which helped send oil prices to the dumps in 2014. Having collectively shot themselves in the foot, the big question is how affected U.S. drillers will be by sub-$60 WTI. Rig counts continue to fall, spending is being slashed, but output has so far been stable. Whether the industry can maintain output given today’s prices or production begins to fall will have an enormous impact on international supplies, and as a result, prices.

3. Supply and Demand. Global oil inventories balance supply and demand. If production exceeds demand, excess supplies can be stored. When consumption exceeds demand, inventories can be tapped to meet the incremental demand, and the relationship between oil prices and oil inventories allows for corrections in either direction. Non-OPEC suppliers produce 60% of the world’s oil, and although they are 50% larger than OPEC, they don’t have sufficient reserves to be able to control price and can only respond to market fluctuations.  OPEC, however can directly influence market pricing, especially when the supply of oil produced by non-OPEC nations decreases.

4. OPEC’s Next Move. OPEC, a consortium of 13 countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela, is the single largest entity impacting the world’s oil supplies . OPEC is responsible for 40% of the world’s oil production, and sets policies among member countries to meet global consumption. OPEC can affect the price of crude oil, by increasing or reducing production among member countries.

5. Geopolitical flash points. In the not too distant past, a small supply disruption would send oil prices skyward. If an oil-rich area becomes politically unstable, supplier markets react by bidding up the price of oil so that supplies are still available to the highest bidder.  In this instance, only the perception of a shortage in supply can increase prices, even while production levels remains constant. The history has demonstrated time and again that geopolitical crises are some of the most powerful short-term movers of oil prices.