Deamnd and supply and the oil price

As every Economics students know market prices are determined by demand and supply. The price of oil is no different.

Since July 2014 crude oil prices have fallen from $116 a barrel to a low of $28.

Many have suggested that the oil price is about to climb again, but the International Energy Agency (IEA) has said that demand and supply factors don't support that. (Shout out to my old friend Trevor Morgan, the principal author of the IEA report.)

The article below provides some detail, but in brief the IEA don't see demand climbing and believe supply in 2016 will actually be higher than in 2015. With oil stocks rising at 2 million barrels a day at present this already suggests that the market equilibrium price is still higher than the market clearing price.

The ABC covers the story here

Questions.

1. Draw a demand and supply diagram to show the current state of the oil market as described by the IEA.

2. Draw a supply diagram for the oil market showing the change that the IEA predicts will occur over 2016. (Use a 2015 and 2016 label on two demand curves and two supply curves). Describe and explain the new equilibrium in the oil market by the end of 2016.

This is an article that describes a fundamental concept for all Economics students. IB students might consider it for a microeconomics IA.