Oil Prices Hit 2016 High, Yet Outlook Remains Jaded

Global oil markets may still be reeling, but earlier this month a light emerged at the end of the tunnel when prices jumped by more than 1%. As US crude settled to just over US$50 a barrel, producers celebrated a 2016 high. The figure was the first time in almost a year that oil topped the US$50 mark, and was welcomed as a positive change in the midst of concerns over domestic stockpile draws and attacks on Nigeria's oil industry.

Price spike outshined by looming concerns

That said, the 1% price increase has by no means eradicated these fears. In early June, U.S. crude stockpiles fell by 2.7 million barrel, which marks three weeks of constant decline. The risk of attacks from rebels in the Niger Delta is also a keynote concern, though the government has maintained that it’s initiating talks in a bid to prevent disruption. As Africa's biggest producer, keeping Nigeria’s oil industry on its feet is a top priority for global energy leaders.

"The market remains concerned about unscheduled supply interruptions with the latest coming from additional shut-ins in Nigeria," comments Dominick Chirichella, senior partner at the Energy Management Institute in New York. "With the industry projecting a decline in total U.S. crude oil stocks in this week's reports, the market bears are remaining on the sidelines."

Experts predict two years of further decline

So what’s the short-term outlook in the wake of domestic stockpile draw risks, the imminent threat of Nigerian attacks and other factors like severe fires Canada's oil sands region and potential supply outages in nations like Venezuela and Libya?

In its latest market analysis, the EIA predicts U.S. crude production declines for 2016 and 2017 will materialise, yet remain largely unchanged to this month’s figures. Of course, markets are continually evolving so whether or not the respective 830,000 bpd and 410,000 bpd production drops come to fruition is yet to be seen.

Despite the financial challenges the oil industry is currently facing, changes to niche regulations are constantly being introduced. ‘Vapour Pressure Testing of Gasoline and Crude Oil - Regulatory Changes and Resulting Possibilities’ summarises extensive adjustments in process and laboratory vapour pressure testing, and how they’ve facilitated the emergence of ‘mini methods’ like ASTM D5191, D6378 and D6377.