The Key Points Of Discussion Exxon Has Been Concerned About ✓ Solved

Exxon has been concerned about developments in the world supply of crude oil. Both Venezuela and Iran have very significant proven oil reserves. Both countries are under sanctions from the US to restrict or prevent them from selling oil.

To put things into perspective, the world production of crude oil is just over 100 million barrels per day. The U.S. produces about 12 million barrels and all of OPEC about 30 million barrels. As of early 2019, Venezuela produces just over 1 million barrels down from a peak of 6 million barrels. Iran also produces over 1 million barrels.

Both Venezuela and Iran need the “hard currency” that comes from the sale of crude oil and refined products. Russia and China have the technology and expertise to help these countries expand their production and sale of oil. However, Russia relies on the sale of its own oil and gas as a main source of income and has an incentive to avoid the decline of oil prices when Venezuela increases production.

MCS has been tasked by ExxonMobil with looking at new research into the world price of oil. Find one current article about the price of crude oil and post it in this discussion. Discuss the likely price movements of oil over the next few weeks. What are the analyst’s main concerns?

Paper For Above Instructions

Exxon's concerns regarding developments in the global crude oil supply primarily focus on the geopolitical and economic implications stemming from countries like Venezuela and Iran. As considerable holders of oil reserves, their production levels are heavily influenced by international sanctions, which profoundly affects world oil prices.

Current Dynamics in Global Oil Supply

The ongoing sanctions against both Venezuela and Iran have created a complex environment for crude oil production. As of early 2019, Venezuela has seen its oil output decline dramatically from a peak of 6 million barrels per day to just over 1 million barrels. Similarly, Iran’s output also hovers around the 1 million barrels per day mark, constrained by sanctions. These two nations' limitations in production have implications for the overall global oil supply, which sits at approximately 100 million barrels a day.

Impact of Sanctions

Sanctions imposed by the United States aim to curtail the revenues of these nations derived from oil exports. This restriction results in a reduced supply in the global market, which typically exerts upward pressure on oil prices. However, the situation is further complicated by other nations, such as Russia and China, who have shown willingness and capability to support Venezuelan and Iranian oil production financially and technologically. Russia itself balances its own oil revenues against the global oil price, which means they may not support a scenario where oil prices significantly decline.

Recent Trends in Oil Prices

To delve deeper into the market dynamics, a current analysis from Investing.com reveals that analysts forecast a potential increase in oil prices over the coming weeks. The primary reasons cited include geopolitical tensions and production limitations from OPEC nations, notably Venezuela and Iran. As sanctions persist, the disruption in their output is projected to create ongoing pressure on supply which may lead to higher prices.

Possible Price Movements and Analyst Concerns

Looking ahead, analysts are particularly worried about the balancing act between demand recovery and supply constraints. After the recent volatility in the market due to global events such as the COVID-19 pandemic and its aftermath, the demand for oil has been rebounding. However, the capacity of supply-side nations like Venezuela and Iran to react to this demand remains stunted by geopolitical tensions. In addition, OPEC’s management of production also plays a critical role in determining price trajectories.

Market Sentiment and Speculation

Furthermore, market sentiment is heavily influenced by speculation regarding future sanctions or changes in the geopolitical landscape. For instance, any potential easing of sanctions against Venezuela or shifts in U.S. foreign policy could lead to sudden increases in their oil exports, which might overly glut the market and cause prices to fall. Conversely, persistent sanctions would likely maintain a bullish sentiment in oil markets.

Conclusion

In summary, Exxon's concerns about developments in the crude oil supply revolve significantly around the limitations placed upon Venezuela and Iran, as well as the broader implications for oil prices. Recent trends suggest a cautious optimism regarding price movements in the weeks ahead; however, uncertainty caused by geopolitical tensions and production strategies will continue to shape analysts' outlooks and market behaviors.

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