EIA, OPEC, IEA Influencing Oil Prices

Oil is more or less flat in the Asian session, Brent oil is trading at 64.95 and WTI is at 60.56 as traders are more focused on equities and currencies.  Oil dipped yesterday with U.S. crude retreating further from a one-month peak of almost $62 a barrel earlier this week, after Saudi Arabia said it was ready to raise output further to meet strong demand. Crude prices hit a high of $61.82 a barrel earlier this week, its strongest since May 6, as firm demand and a stock drawdown lifted the market.

But the rally was halted by a dimming global economic outlook as well as top crude exporter Saudi Arabia saying it was ready to increase its oil output in the coming months to a new record to meet a rise in global demand.  In its monthly report on the oil market, the IEA lifted its 2015 demand forecast to 94 million barrels a day, 300,000 barrels per day more than the previous level. The increased forecast came after world oil demand soared in the first three months of 2015.

However, the IEA said there were “doubts” that some reasons for the pickup in demand – such as an exceptionally cold European winter in early 2015 that lifted heating demand – would repeat.

The estimate of US oil production was raised 90,000 b/d for fourth-quarter 2014 and more than 200,000 b/d for this year’s first quarter, based on latest data from the US Energy Information Administration. Sharp cuts in drilling rates are nevertheless starting to curb supplies. In all, US oil production is expected to average 12.7 million b/d in 2015, up 800,000 b/d from year ago, IEA says.

Global refinery crude runs reached an estimated 77.9 million b/d in April, 300,000 b/d lower than March and 1.7 million b/d higher than a year earlier.

Industry oil stocks from members of the Organization for Economic Cooperation and Development built up by a steep 38 million bbl. in April, ending at 147 million bbl. above average levels, as refined-product stocks moved to their widest surplus in over 4 years.

Moreover, the agency pointed to “signs of persistent oversupply” in the market in light of still-high US crude output and record production from key OPEC members.

For consumers, lower oil prices mean good news at the gas pump. But for energy companies, it could mean a labor shortage—particularly of the highly skilled workers the industry needs—according to a recent article by The Times-Picayune. Yesterday data showed that US Core Retail Sales were much higher than expected as consumers enjoy the cash bonanza as lower gasoline prices leave money in their pockets.

Oil prices have nearly halved over the last year, meaning that companies have had to cut production costs in order to stay competitive. Hornbeck said that he worries that recent layoffs could deter younger workers from pursuing careers in the industry.

The threat of layoffs comes on top of another labor issue for oil companies—highly-skilled, older workers nearing retirement—the so-called “great crew change.” Other industry watchers point out that companies may cut back on staff as they get more efficient at conforming to federal safety regulations.

 

FX Empire