While it is common knowledge that oil prices have collapsed from their lofty heights in 2014, it is not as obvious that they have crept up since then. By the first quarter of 2017, Brent crude was in the mid US$50/barrel range, up 100 percent from January 2016 lows. Yet, that’s still half what they were just before the crash in late 2014.
These large shifts in the oil price are driven by an imbalance in supply and demand. The sharp drop in prices in late 2014 was preceded by a strong and steady increase in supply, even as demand softened. Currently, prices are relatively steady, in part because the supply and the demand are mostly in balance. To understand what lies ahead for prices, it is a matter of seeing how supply- and demand-side factors line up.