OPEC BASKET CRUDE OIL

PRICE DEVELOPMENT FROM

MAY 2014 TO MAY 2015

The develop of the oil price has been changing radically from October of
2014 to the actual days. Taking a drop between Dec-2014 to Jan-2015.

OIL PRICE 2014-2015

This statistic illustrates the monthly average crude oil prices of the OPEC (Organization of
Petroleum Exporting Countries) basket for the period between May 2014 and May 2015. The
OPEC basket is a weighted average of prices for petroleum blends produced by OPEC
countries. It is used as an important benchmark for crude oil prices. In July 2014, the
average price of the OPEC basket was at some 105.6 U.S. dollars per barrel.

During 2011 to 2014 the oil price was been stable between 90 100 dollars.

 Oversupply and weak demand

Changing OPEC policy
Lower incidence of supply interruptions for
geopolitical reasons
Dollar appreciation

What were the causes of

the fall in oil prices ?

 The imbalance in the market in 2014 mainly due to

oversupply , reflecting a record increase of 2 million
barrels of production in non-OPEC countries.
This increase took place mostly outside OPEC , focusing
on North America and particularly in the US, where ,
from 2013 to 2014, oil production rose from 7.4 to 8.7
million barrels a day. Such growth has contributed to a
significant decline US oil imports.

Oversupply and weak

demand

 On November 27 in Vienna, Saudi Arabia change drastically the

policy, despite opposition from some member countries , calling
for a cut in production to drive up prices, Saudi Arabia, with the
support of the other monarchies of the Gulf, imposed the decision
to keep unchanged poster production, set at 30 million barrels.
The argument used to justify the measure was that OPEC needed
to cope with the increased production outside the cartel,
especially in light tight oil ( LTO) in the United States, and that
the solution to low prices was , paradoxically , allow they would
continue dropping , thus forcing the withdrawal from the market
oil fracking, and others with high production costs.

Changing OPEC policy

 On the second half of 2014 has been interrupted because of

conflict in the Middle East and North Africa were lower than
expected. In Libya, despite the civil war, in the third quarter,
production recovered by 0.5 million barrels, while in Iraq,
after the stagnation of the progress of the jihadists of the
Islamic State, the production was hardly affected .
Moreover, the sanctions imposed on Russia by the EU and the
US on the occasion of the conflict in Ukraine have not had any
effect on the market after June 2014. In fact , production in
Russia in 2014 averaged 10.5 millions of bpd , which is a
record of the post- Soviet era.

Lower incidence of supply

interruptions for geopolitical reasons

 In the second half of 2014 the US dollar appreciated by 10 %

in trade -weighted terms , against major currencies. A
stronger dollar tends to have a negative impact on oil prices
as demand usually decrease in those importing countries
which are undermined the purchasing power of their
currency. Empirical estimates of the magnitude of the effect
of the appreciation of the US dollar differ widely , ranging
between two extreme positions : those who believe that an
appreciation of 10% results in a decrease in a similar
percentage in the price of oil and the that reduce this
percentage to 3% .

Dollar appreciation

 OPEC seems unwilling to change their new objectives at

its meeting on November 27.
Expect an increase in production from OPEC , especially
from Iraq.
Outside OPEC , an upward shift of production in Russia
is expected while in North America, it seems that the
production of unconventional oils will increase or at least
not experience a sharp decline.

Outlook for the first half

of 2015