Here are some of my thoughts on what could impact oil prices (my thinking here is oil prices changing up or down by 25% or more):
Short-term (1 to 2 years):
Venezuela (potential for higher prices): I will likely post a blog on these issues later; however, you can read about some issues with Venezuela now if you wish. Click here to learn about quality issues that have come up with their oil exports. And click here to learn about their upcoming debt payments.
Per the International Energy Agency (IEA), Venezuela oil supply has dropped from 2.46 million barrels per day in 2014 to around 2.07 bpd in the first half of 2017. That's a 16% drop. One could argue the case that OPEC (with Russia) has a supply agreement in place, which is impacting what Venezuela supplies. One problem I see with that is that per the IEA data, Saudi Arabia has increased their supply by 4.1% since 2014. (Admittedly, Saudi Arabia is down if I selected 2015 or 2016 as a comparison; however, Venezuela's supply has declined each year during that timeframe.)
US Shale (potential for flat to down): I lean towards the idea that shale may actually have no impact on prices. My thought process is driven by the following quote via this Bloomberg article:
“Capital markets have clearly decided what they want. Reduced spending, higher returns and increased cash returns to shareholders.”
Investors want to make some money and constant drilling that drives down oil prices to the point of breakeven for shale producers does not equal an ROI for investors.
But then who knows as US shale producers have a history of drilling too much oil.
OPEC/Russia (potential for either direction): OPEC and Russia are currently negotiating regarding their supply agreement that is supposed to end in March 2018. If they keep to their current agreement beyond March 2018, maybe oil prices increase. If everyone goes their own way on production, prices are likely to drop.
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