KUALA LUMPUR (Jan 8): Five factors seen likely to affect oil prices this year are China’s economy, American shale output, elasticity of demand for the commodity, OPEC’s next move and geopolitical flashpoints, according to Oilprice.com

The five variables were listed out by Washington DC-based energy and environmental issues writer Nick Cunningham in an opinion piece for the top oil and energy news portal.

On China, he said the republic was the second largest consumer of oil in the world, surpassing the United States as the largest importer of liquid fuels in late 2013.

“More importantly for oil prices is how much China's consumption will increase in the coming years.

“It is not at all obvious that China will be able to halt its sliding growth rate, but the trajectory of China's economy will significantly impact oil prices in 2015,” he said.

As for American shale, Cunningham said by the end of 2014, the U.S. was producing more than 9 million barrels of oil per day, an 80 percent increase from 2007.

He said U.S. output went a long way to creating an oil glut,  which helped send oil prices to the dumps in 2014.

“Having collectively shot themselves in the foot, the big question is how affected U.S. drillers will be by sub-$60 WTI.

“Rig counts continue to fall, spending is being slashed, but output has so far been stable. Whether the industry can maintain output given today's prices or production begins to fall will have an enormous impact on international supplies, and as a result, prices,” he said.

On elasticity of demand, he said low prices could spark higher demand, which in turn could send oil prices back up.

The cure for low prices being low prices could be applied to both the supply and demand side of the equation, he said.

However, he was unsure if oil selling at fire sale prices would spur demand.

"In some countries where oil is more regulated, low prices may not trickle down to the retail level,” he said.

Meanwhile, he said OPEC was accountable for the remarkable downturn in oil prices last year.

“While many pundits have declared OPEC irrelevant after their decision to leave output unchanged, the mere fact that oil prices crashed after the cartel's November meeting demonstrates just how influential they are over price swings.

“For now OPEC, or more accurately, Saudi Arabia, has stood firm in its insistence not to cut production quotas. Whether that remains true through 2015 is up in the air,” he said.

Finally, on geopolitical flashpoints, Cunningham said that in the not too distant past, a small supply disruption would send oil prices skyward.

“In early 2014, for example, violence in Libya blocked oil exports, contributing to a rise in oil prices.

“In Iraq, IS overran parts of the country and oil prices shot up on fears of supply outages. But since then, geopolitical flashpoints have had much less of an effect on the price of crude,” he said.

Nevertheless, history has demonstrated time and again that geopolitical crises are some of the most powerful short-term movers of oil prices, said Cunningham.

Cunningham said oil prices were unsustainably low right now, and that many high-cost oil producers and oil-producing regions were currently operating in the red.

“That may work in the short-term, but over the medium and long-term, companies will be forced out of the market, precipitating a price rise.

“The big question is when they will rise, and by how much,” he said.