It’s a sign of good things to come that oil prices have finally dipped below $50 a barrel and that the U.S. oil industry is recovering.
But even as oil prices rise, other commodities that are already well below $100 a barrel remain in an oversupply, with oil inventories down more than 10% from last year, according to an oil industry tracker.
And the world remains on the brink of a fourth oil shock, this time in China, as the nation’s slowing economy makes it increasingly difficult to ship its oil through the Middle East.
Here are five of the biggest worries for oil and the global economy: 1.
The oil glut will push prices up again and the oil market may get overhyped again.
The glut, which is already at or near historic highs, has pushed up oil prices in recent weeks.
Oil inventories are down nearly 30% from a year ago, with the International Energy Agency reporting in April that the world’s oil inventies were down by almost half.
This is especially concerning as Chinese oil demand is already nearly three times the global average, and many experts think China will soon run out of crude.
The country currently imports about 15% of the world total.
If it can’t make the switch to cheaper oil by the end of this year, the oil glut could push prices higher, says James Corbett, director of the New York-based Center for Strategic and International Studies, which monitors oil markets.
“I think the Chinese are going to be at risk of getting out of the glut,” he says.
“The global glut will remain the main concern.”
The U.K. could hit its highest oil price since 2007, according a report from the IMF, if it hits a hard landing, even if it does not trigger another crisis.
The IMF has forecast a rise in global oil prices of 3.2%, to $75 per barrel by 2019.
That would make it the most expensive year for the global oil market since 2008, when global prices hit an all-time high of $120 per barrel.
The report, which came out last week, does not predict an outright spike in global prices, but does say that a “hard landing” will be “most likely” by the year 2026.
If the U., the world capital, doesn’t have a sharp enough shock, its price could hit $100 by 2026, which would put it well above the average for the previous seven years, the IMF said.
China will be hit hard, and not just because it is the world champion of energy, but also because it’s the second-biggest energy consumer in the world.
China is the third-bigger consumer of oil, after the U