Oil Deliveries Will Depend on Trends in Global Demand

10 january 2017

The general interest among oil exporters in increasing their revenue drove the OPEC and a number of oil exporters that are not members of the OPEC to agree oil production quotas in late 2016, but all parties to the agreement will have to adhere religiously to the obligations they assumed under it even as competition in the market intensifies, the Analytical Center experts note in a new bulletin on the current trends in the global economy titled 'Taking the Pulse: the OPEC and Russia to reduce oil production. In focus: Purchasing Power Parity.'

It is difficult to estimate how much global oil prices may increase by the spring of 2017 if total supply of oil in the market falls by 1.8 million barrels a day. This is going to depend on the trends in global demand for liquid fuels and a possible increase in supply from countries that are not party to the agreement, for example, US suppliers could increase the production of shale oil, the specialists note.

The experts also focus on purchasing power parity in their bulletin. They note that purchasing power parity GDP has become a widely used indicator that is truly indispensable in a number of international comparisons, but it’s important to appreciate its limitations too, they believe. First of all, purchasing power parity is regularly revised and the changes in purchasing power parity over long periods of time are hard to interpret. Secondly, the whole point of purchasing power parity is to eliminate the impact of FOREX variations on GDP. Consequently, it cannot be used to study the impact of macroeconomic policies or business cycles, but it is very convenient as means for studying general problems in terms of personal consumption. At the same time, purchasing parity currency exchange rate calculated by various organizations (such as the World Bank and the IMF) for various purposes do differ from each other, albeit not by much, the experts stress.

For more see the bulletin: Taking the Pulse: the OPEC and Russia to reduce oil production. In focus: Purchasing Power Parity.

For other issues of our bulletin on current trends in the global economy see Publications.