Political troubles to dictate 2016 oil markets

Supply and demand has ruled the market since mid-2014, but politics are about to take over again

Strong supply and tepid demand in recent years has allowed the fundamentals to trump politics in the oil market. Even as Islamist terrorists brutalised their way across northern Iraq in mid-2014, prices mustered a brief final hurrah. Soaring production from North America and weak consumption in China and across the OECD yielded a glut. As it became clear that Mosul’s fall would not affect Basra’s oil, the price slump got underway.  In 2016, as the supply-demand balance tightens, politics will return to the oil market. On the supply side, Opec’s internal frictions and its dwindling spare capacity will return as themes. Unrest and war in and around oil-exporting countries, ignored by a complac