After a horrendous 2015, it’s been a a wild ride for the crude oil price so far in 2016.
In the first 12 trading sessions of the year, front month US WTI futures tanked, falling by nearly $11 per barrel, or close to 30%.
However, as quickly as the move began, it was near reversed, rallying close to $9 per barrel, or 33%.
While the prospect of even easier monetary policy settings from the ECB and BOJ contributed to the sharp recovery, rumours about prospective output cuts – led by Russia – was deemed by many analysts to be the main catalyst that sparked the enormous short covering rally.
Understanding the crude oil market is a complex game, involving not only supply and demand dynamics but also other factors such as geopolitics, religion and history.
However, knowing who are the largest suppliers in terms of global output remains a valid method of filtering the news from the noise when it comes to statements regarding the crude market.
These three charts, courtesy of Bank of America-Merrill Lynch, reveal just who holds the greatest market sway when it comes to global output.
The first, shown below, breaks global output down by region/cartel. The scale on the left hand axis for all charts is in thousands of barrels per day.
OPEC, at over 40%, remains the dominant player when it comes to global supply.
The next chart breaks down current OPEC crude production by nation.
And here’s the same chart, only by OPEC market share.
Based on the first chart, and the following two, it’s clear that the gulf states, especially Saudi Arabia, continue to hold greatest sway, not only due to their dominant market share but production costs towards that sit towards the lower extremes of the global production cost curve.
BAML suggest that there’s two factors that could lead to a continued price recovery in the months ahead – a peak in oil inventories, something that will require robust demand and falling non-OPEC supply given increased production in Iran, along with the potential for fiscal crisis within OPEC, “driving a broadbased willingness to cut production”.