Despite expectations that prolonged overproduction in the oil patch would force smaller producers to cut or altogether end output, their resilience over the last several months has caused the International Energy Agency to revise predictions of an oil rebound later this year to a forecast of persistently low prices. Traditionally low-volume producers have maintained production admirably amidst the price war, and with no signs of an agreement between OPEC members to limit the flow of oil due to infighting, the revision by the IEA looks to be apt. War would be a strong catalyst for an increase in prices, and last week’s threats from Turkey to invade Syria and fight the Islamic State caused oil to incline substantially. However, prices lost all the ground gained after Tuesday’s IEA report, indicating a rapidly worsening outstripping of demand by supply early this year of 1.75 million daily barrels, higher than previous estimates of 1.50 million.
In observing the events of the second half of last year and January, there is no justification for functions of oil price to change the direction of its momentum in the medium-term, though demand will likely continue to move further downwards. The main themes of oversupply come from countries like Iraq and Iran, the latter of which is enjoying high production without being shackled by sanctions. Recently measured API data shows stockpiles of crude continue to reach toward capacity, with inventory climbing by 2.40 million barrels in the last week alone and upcoming EIA numbers expected to take the same tone. The oil market is waiting tentatively for further progression in the situation, with direction more dependent on news than ever before. If the Saudis or Turks make good on their statements to send troops into Syria, prices could conceivably soar, while scheduled reports on inventory that show increasing buildup are likely to have the opposite effect.