CASE STUDY 2 (10%) Answer all the questions Oil falls 4 % on swelling oversupply Oil prices fell 4 percent on Monday as Iraq announced record-high oil production feeding into a heavily oversupplied market, wiping out much of the gain made in one of the biggest-ever daily rallies last week. Brent crude, the global benchmark, was down $1.35 at $30.83 a barrel at 0851 GMT, losing more than 4 percent from Friday's closing price, where Brent surged 10 percent. U.S. crude traded $1.15 lower at $31.04 a barrel, regaining its unusual premium to Brent prices. Iraq's oil ministry told Reuters on Monday oil output had reached a record high in December. Its fields in the central and southern region produced as much as 4.13 million barrels a day, the government said. "The news that Iraq has probably hit another record builds on the oversupply sentiment," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam. "The oversupply will keep markets depressed and prices low, and on the other hand short positions are in excessive territory," he said. Indonesia's OPEC governor said that support among the Organization of the Petroleum Exporting Countries for taking steps to prop up crude prices is slim, with only one OPEC country supporting an emergency meeting over the matter. Source: The Star Online 25th January 2016. a) Define supply. Explain the law of supply using a diagram. (4 marks)