Oil prices hit another new five-and-a-half year low on Monday as surging global supplies continue to rock the oil market. The news of strong oil supplies from Russia and Iraq put downward pressure on oil prices today and overcame any worries from the escalating violence in Libya that's threatening its oil exports.
Russian has its best year since the Soviet Union
According to a report from Reuters, Russia's oil production hit a post-Soviet high last year. Production averaged 10.58 million barrels per day last year, which was up 0.7% due to contributions from small nonstate producers. As the following chart shows, Russia's daily oil production has steadily risen over the past few years as investments have poured into the country's oil sector due to strong prices and an open opportunity.
Strong Russian production is bad news for oil prices as there simply isn't enough demand for all the oil being produced right now and it is far from the only country with strong production.
Iraq is back on top
Iraq is also enjoying its strongest oil production in decades. Oil exports from the Middle Eastern nation hit levels not seen since 1980 according to the country's oil ministry with the country's southern oil export terminals achieving record sales. As we see in this next chart, Iraqi oil production has been very volatile over the years due to its conflict-laden past.
That being said, production right now continues to head higher as the country is enjoying relative stability for a change. Despite issues with ISIS in the north, the country's southern oil fields are flowing openly at the moment, which is contributing to the glut of oil currently available on the market.
Libyan oil is still flowing at the moment
Even Libyan oil continues to flow, despite escalating violence in the country. Last week a blaze at a major oil terminal due to fighting in the country slowed down the country's oil exports and caused that port to shut down. More fighting erupted this week as a Greek-owned oil tanker was bombed by an unidentified military jet while it was anchored in Libya, according to reports. That bombing resulted in at least two deaths and could lead to oil exports from the country to shut down again.
As we see in this next chart, Libya has been trying to regain full oil exports since its civil war began in 2011.
While recent oil exports were down to just 128,000 barrels per day, none of the country's production is really needed right now as oil supplies elsewhere have more than made up for the lack of Libyan oil on the market. This is in stark contrast to the last time Libyan oil production was shut down. As we see on this next chart, the country's civil war in 2011 had a very noticeable impact on oil prices. The plunge in Libyan oil production led to higher oil prices, which caused Americans to pay more at the pump a few weeks later.
Things are different this time as strong production from Russia, Iraq, and the U.S. is making Libya's oil unimportant to the market. This is why oil prices aren't budging even though recent fighting in the country has been centered around its oil infrastructure.
Oil prices will continue to slide until the market sees a shift in the supply and demand dynamics. Until that happens oil prices will likely keep heading lower because there's simply no reason for oil prices to move higher at the moment. That makes it an unsettling time for energy investors, but one that should eventually pass as the oil market has a history of correcting itself in time.