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The article explains the current scenario in the oil industry and the possible reasons of why oil prices are likely to remain steady throughout the year. The War situation in Libya had considerably caused worries for the oil industry. The inflating prices of oil caused OPEC members to review their production policy. However no significant decisions were made at its meet. Kuwait, UAE and Saudi Arabia pitched in to make up for the loss in Libyan oil supply. Although the war is over is Libya the problem is far from resolved. Libya might be able to stagger back to its feet by August nest year; however it would likely be the year 2013 by the time it fully returns to its pre-war oil producing capacity. The slow global economic recovery, weak US economy, debt crisis in Europe and Greece and fear of a recession are adding to the woes of the oil industry. The debt crisis in Greece and fear of it likely resulting in a full fledged financial crisis, caused oil trade in Asia to come down considerably. Members of OPEC have decided to maintain a tight reign on oil production in view of the weakening US economy. This is the likely reason that analysts expect oil prices to remain stable throughout the year. The OPEC members will meet again this year in December to analyse and reassess its strategies towards oil production. It is estimated that at the most Libya will be able to produce 1 to 1.2 million barrels of oil per day by August next year. However it will be a long time before Libya will regains it pre-war oil producing capabilities. As supply from Libya increases, the surplus oil being produced to make up for the loss of Libyan oil will gradually be decreased. This will help maintain the production flow which will ultimately result in avoiding any major fluctuations in oil price. The risk premium on Libyan oil has been lowered. The likely reason for this is that the recovery of Libya’s oil producing capabilities now seems more probable and positive than it did in early August. The global demand for oil has been lowered from 200,000 barrels per day to 89.3 million barrels per day for the year 2011, by the International Energy Agency. It estimated that the global demand for oil in the year 2012 would be around 90.7 million barrels of oil per day. It yet remains to be seen if the OPEC members are sincere in their efforts or are just rolling the ball in each other's courts. Kyles Humphrey is an experienced freelancer in oil related fields, who periodically writes articles related to oil prices & indexes and crude oil including tips on investment in oil. Please visit oil.com for more details.
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