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Page added on June 13, 2015
Global Oil Shortage Before Year’s End?
Now that OPEC has left its production quota unchanged, the world will continue to see a glut in supplies, right?
Some analysts aren’t so sure. Sanford C. Bernstein predicts that by the end of the year global demand will outstrip supply by an estimated 1.5 million barrels per day.
That flies in the face of a lot of separate estimates. The IEA says that oil supplies are still in excess of what the world is consuming, by some 2 million barrels per day. Even with flat supplies coming from US shale, drillers are still pumping way more oil than the world is consuming. That leaves Bernstein as an outlier when it comes to guessing which way oil markets are heading.
But there is reason to believe that Bernstein is not off the mark. While market analysts are right to closely watch the trajectory of US production levels as well as what OPEC is up to, a lot less attention is being paid to the demand side of the equation. Part of OPEC’s strategy, we must remember, is to ensure the world stays hooked on oil for the long haul. The cartel’s strategy of keeping prices low dovetails with that – low prices reduce the urgency to transition away from crude oil.
And their strategy is bearing fruit – demand is growing quickly. The IEA said in its May report that “global demand growth gained momentum in recent months.” That is certainly true in the US, where motorists are hitting the roads at levels not seen since before the financial crisis. Seduced by lower prices, gasoline consumption is at its highest level since 2007, after years of stagnation. Low gas prices are also giving a boost to SUV sales as drivers cast off their energy efficient ways at the first sign of weak prices.
OilPrice.com
That suggests that OPEC’s strategy is working.
Of course, if demand does continue to rise, that will put an end to the low prices that spurned the rise in demand to begin with. Oil prices will rise in response to higher demand and the cut back in US shale production, and OPEC will have balanced the market back in its favor, having seized market share.
If Bernstein is right, however, and demand exceeds supplies, then oil prices will have to rise quite a bit. Already crude oil inventories have posted several consecutive weeks of drawdowns, an indication that the glut is no longer building, but rather is already in the process of abating.
There are several possibilities that would completely upend this scenario, however. The first is that demand slows as prices rise and there is a market equilibrium found, with prices leveling off in the $70 to $80 range.
But there is another possibility that Bernstein may be overlooking: the potential wave of new production coming online in the months ahead. Iran is on the verge of rejoining the international community, opening the flood gates to 400,000 barrels per day in the near-term. That number could double or triple within a year.
Iraq is projected to lift oil exports by 100,000 barrels per day in June, and that number could continue to rise.
Yet one more OPEC nation could also boost production. Libya, suffering under years of war, could potentially add another half million barrels of oil per day to global supplies, perhaps as early as July when oil export terminals are put back into service. Taken together, these OPEC members could add multiple millions of barrels per day. And that would come on top of very high levels of production as OPEC is already exceeding its stated quota.
In other words, the Bernstein report is correct to note that demand is rising in response to lower prices. But it is far from clear if consumption levels will more than exceed the glut in supplies. A lot will depend on the rate of demand growth, as well as the magnitude of a supply cut from US shale.
21 Comments on "Global Oil Shortage Before Year’s End?"
Plantagenet on Sat, 13th Jun 2015 12:32 pm
I can’t wait for nordent and the other dummies to go hysterical because this article uses the term “oil glut”.
Meanwhile, the facts remain clear. The global oil glut hit in late 2014 and drove down oil prices, which should stimulate demand. Under normal market conditions rising demand would eventually outstrip oil supply, and the glut would end. Perhaps this article is right, and the glut will end by 2016.
sugarseam on Sat, 13th Jun 2015 12:48 pm
Sounds exactly like the “bumpy plateau” to me.
sugarseam on Sat, 13th Jun 2015 12:59 pm
also, why did this site leave off the rest of the original story’s headline?
Pops on Sat, 13th Jun 2015 1:42 pm
Posted a chart in the forums that shows all the decline in miles driven in the US has already evaporated and we’re back above 2007.
http://peakoil.com/forums/post1252132.html#p1252132
High price leads to demand destruction all right, but it can lead to higher production too
No sign so far that oil will be worthless anytime soon. I posted this rant in Feb.:
“But demand for oil has clearly not collapsed. If you are thinking and preparing for an impending deflationary recession based on the premiss that oil demand – desire – has crashed and oil is no longer valuable you will be fooled. I don’t usually make such bold predictions but I am this time simply because that meme is so far from reality. ”
http://peakoil.com/forums/falling-oil-price-teotwawki-t71030.html
penury on Sat, 13th Jun 2015 2:57 pm
Every day there are articles extolling the oil glut and competing articles showing the coming shortage. Both articles probably contain truth but both are referring to different time periods. I don’t know when the periods will change and that is the real conundrum if only we could foretell the future. Well we can, peak oil is real, just not now.
Plantagenet on Sat, 13th Jun 2015 6:01 pm
Thanks, POPS, for linking to the plots showing growing miles driven the US—-this is consistent with increasing US auto sales, especially of huge pick ups and SUVS that get lousy mileage.
If this keeps up the oil glut will be over before the end of the year.
GregT on Sat, 13th Jun 2015 6:30 pm
“Posted a chart in the forums that shows all the decline in miles driven in the US has already evaporated and we’re back above 2007.”
If the true cost of oil was reflected at the pumps, I doubt many people would be driving at all.
Davy on Sat, 13th Jun 2015 6:39 pm
Pops said “No sign so far that oil will be worthless anytime soon” No doubt Pops oil has a unique value as a must have resource for an oil culture based on energy intensity of production, distribution, and transport. The key point is oil is no longer systematically, in aggregate, and macro economically contributing a growing positive influence to the whole system.
What is occurring now is a system wide drag from a lower value resource permeating all aspects of our oil culture. This cannot end well because entropic decay in numerous areas is winning the battle against our efforts. We are slowly falling behind in every area I can see.
You can talk about more miles driven and increased production. Yet, that is likely coming at the expense of other areas. We are just trading our primary desire to drive and required services for other discretionary activities. Low prices, high prices and or a mix over time does not change the fact the resources is depleting and showing diminished economic value for the entire global economy.
The key test is how long our system can mitigate and adjust to this depletion drag. My feelings are this will not be very long especially with all the multiple problems building and going unsolved. Population is growing and pressure to consume is growing. The need to grow is growing and the means to grow is diminishing. That is a sure sign of an event on the horizon of unmet needs translating into confidence loss translating into liquidity loss. Financial liquidity loss is the end game. When our financial system cannot manage our complexity through liquidity the game is over.
BobInget on Sat, 13th Jun 2015 7:15 pm
Tanks For The Memories
Obama and his Generals are doing exactly what is expected … Fighting WW/2
RIGA, Latvia — In a significant move to deter possible Russian aggression in Europe, the Pentagon is poised to store battle tanks, infantry fighting vehicles and other heavy weapons for as many as 5,000 American troops in several Baltic and Eastern European countries, American and allied officials say.
The proposal, if approved, would represent the first time since the end of the Cold War that the United States has stationed heavy military equipment in the newer NATO member nations in Eastern Europe that had once been part of the Soviet sphere of influence. Russia’s annexation of Crimea and the war in eastern Ukraine have caused alarm and prompted new military planning in NATO capitals.
It would be the most prominent of a series of moves the United States and NATO have taken to bolster forces in the region and send a clear message of resolve to allies and to Russia’s president, Vladimir V. Putin, that the United States would defend the alliance’s members closest to the Russian frontier.
Photo
United States Army soldiers met with residents in Bialystok, Poland. Credit Artur Reszko/Agence France-Presse — Getty Images
After the expansion of NATO to include the Baltic nations in 2004, the United States and its allies avoided the permanent stationing of equipment or troops in the east as they sought varying forms of partnership with Russia.
“This is a very meaningful shift in policy,” said James G. Stavridis, a retired admiral and the former supreme allied commander of NATO, who is now dean of the Fletcher School of Law and Diplomacy at Tufts University. “It provides a reasonable level of reassurance to jittery allies, although nothing is as good as troops stationed full-time on the ground, of course.”
The amount of equipment included in the planning is small compared with what Russia could bring to bear against the NATO nations on or near its borders, but it would serve as a credible sign of American commitment, acting as a deterrent the way that the Berlin Brigade did after the Berlin Wall crisis in 1961.
“It’s like taking NATO back to the future,” said Julianne Smith, a former defense and White House official who is now a senior fellow at the Center for a New American Security and a vice president at the consulting firm Beacon Global Strategies.
The “prepositioned” stocks — to be stored on allied bases and enough to equip a brigade of 3,000 to 5,000 soldiers — also would be similar to what the United States maintained in Kuwait for more than a decade after Iraq invaded it in 1990 and was expelled by American and allied forces early the next year.
The Pentagon’s proposal still requires approval by Defense Secretary Ashton B. Carter and the White House. And political hurdles remain, as the significance of the potential step has stirred concern among some NATO allies about Russia’s reaction to a buildup of equipment.
“The U.S. military continues to review the best location to store these materials in consultation with our allies,” said Col. Steven H. Warren, a Pentagon spokesman. “At this time, we have made no decision about if or when to move to this equipment.”
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Senior officials briefed on the proposals, who described the internal military planning on the condition of anonymity, said that they expected approval to come before the NATO defense ministers’ meeting in Brussels this month.
The current proposal falls short of permanently assigning United States troops to the Baltics — something that senior officials of those countries recently requested in a letter to NATO. Even so, officials in those countries say they welcome the proposal to ship at least the equipment forward.
“We need the prepositioned equipment because if something happens, we’ll need additional armaments, equipment and ammunition,” Raimonds Vejonis, Latvia’s minister of defense, said in an interview at his office here last week.
“If something happens, we can’t wait days or weeks for more equipment,” said Mr. Vejonis, who will become Latvia’s president in July. “We need to react immediately.”
Mark Galeotti, a professor at New York University who has written extensively on Russia’s military and security services, noted, “Tanks on the ground, even if they haven’t people in them, make for a significant marker.”
As the proposal stands now, a company’s worth of equipment — enough for about 150 soldiers — would be stored in each of the three Baltic nations: Lithuania, Latvia and Estonia. Enough for a company or possibly a battalion — about 750 soldiers — would be located in Poland, Romania, Bulgaria and possibly Hungary, they said.
American military specialists have conducted site surveys in the countries under consideration, and the Pentagon is working on estimates about the costs to upgrade railways, build new warehouses and equipment-cleaning facilities, and to replace other Soviet-era facilities to accommodate the heavy American weaponry. The weapons warehouses would be guarded by local or security contractors, and not by American military personnel, officials said.
Positioning the equipment forward saves the United States Army time, money and resources, and avoids having to ship the equipment back and forth to the United States each time an Army unit travels to Europe to train. A full brigade’s worth of equipment — formally called the European Activity Set — would include about 1,200 vehicles, including some 250 M1-A2 tanks, Bradley fighting vehicles, and armored howitzers, according to a senior military official.
The Army previously said after the invasion of Crimea last year that it would expand the amount of equipment it stored at the Grafenwöhr training range in southeastern Germany and at other sites to a brigade from a battalion.
Army units — currently a battalion from the Third Infantry Division — now fly into the range on regular rotations, using the same equipment left in place. They train with the equipment there or take it to exercises elsewhere in Europe.
That, along with stepped-up air patrolling and training exercises on NATO’s eastern flank, was among the initial measures approved by NATO’s leaders at their summit meeting in Wales last year. The Pentagon’s proposal reflects a realization that the tensions with Russia are unlikely to diminish soon.
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“We have to transition from what was a series of temporary decisions made last year,” said Heather A. Conley, director of the Europe Program at the Center for Strategic and International Studies in Washington.
The idea of moving prepositioned weapons and materials to the Baltics and Eastern Europe has been discussed before, but never carried out because it would be viewed by the Kremlin as a violation of the spirit of the 1997 agreement between NATO and Russia that laid the foundation for cooperation.
In that agreement, NATO pledged that, “in the current and foreseeable security environment,” it would not seek “additional permanent stationing of substantial ground combat forces” in the nations closer to Russia.
The agreement also says that “NATO and Russia do not consider each other as adversaries.” Many in the alliance argue that Russia’s increasingly aggressive actions around NATO’s borders have made that pact effectively moot.
The Pentagon’s proposal has gained new support because of fears among the eastern NATO allies that they could face a Russian threat.
“This is essentially about politics,” Professor Galeotti said. “This is about telling Russia that you’re getting closer to a real red line.”
In an interview before a visit to Italy this week, Mr. Putin dismissed fears of any Russian attack on NATO.
“I think that only an insane person and only in a dream can imagine that Russia would suddenly attack NATO,” he told the newspaper Corriere Della Sera. “I think some countries are simply taking advantage of people’s fears with regard to Russia. They just want to play the role of front-line countries that should receive some supplementary military, economic, financial or some other aid.”
Eric Schmitt reported from Riga, Latvia, and Vilnius, Lithuania, and Steven Lee Myers from Washington.
BobInget on Sat, 13th Jun 2015 7:26 pm
If Russia has anything like our Vietnam era Warthog tank killers this will be a great way to get rid of this obsolete junk. Tanks are so WW/2.
Good for intimidating unarmed labor unions or demonstrators with wooden sticks. I need a picture of the first Abrams taking a Russian drone fired Hell-Fired missile down the exhaust tube.
WW/2 weapons for WW/2 tactics.
BobInget on Sat, 13th Jun 2015 7:49 pm
We, the US of A are in a state of war.
Stop kidding yourselves. It’s about oil…..
What we need is gasoline rationing. If for no other reason then to wake up people.
This entire ‘glut’ was, and will be proven to be a massive, orchestrated scam to get the US economy buying cars and suburban houses.
Iran and Saudi Arabia are locked in a death struggle the US has the hubris to interfere in.
In their case, it’s still about oil but wrapped in 16th century mysticism of which few Americans know or care about.
WE’ve known oil will be in short supply on these pages all year. In fact, I brought so much data here to prove as much, I’ve put everyone to sleep. I’ve pointed out how China and India
have secured oil in our backyards. How Russian oil companies not US will soon be in Venezuela.
When USSR planted missiles in Cuba it almost
brought down civilization. Now that China and Russia ‘captured’ the second biggest oil reserve
on the planet, you could hear a i-Phone drop.
Obama’s answer to Russia and China… Send in fucking tanks… but no tanks.
Makati1 on Sun, 14th Jun 2015 4:41 am
BobInget, you are so correct. Look what the cheap Panzerfausts did in WW2 to take out our tanks. A teenager or old man only had to get within 60 to 150 yards of a tank and they could take it out with one shot. Easy to do in city fighting.
The Germans made over six million of them. Tanks are steel coffins. Aircraft carriers are the new steel coffins, as the Navy will find out if they go to war against Russia and China. Both have carrier killers in their 21st century arsenal. The stand off range is now about 1,000 miles … at last report.
Davy on Sun, 14th Jun 2015 5:36 am
His Maksterness speaks on military matters and looks the fool as ever. Makster if the above is so why is your superhero China working on building carriers and refurbish ex-Soviet carriers? Why did your superhero Russia try to buy two amphibious helicopter transport ships from France that serve an aircraft carrier type function of promoting airpower? Makster why did Russia upgrade its main battle tank? There has always been carrier killing weapons makster. Nuk wareheads either large or tactical will do the trick.
All the above I mentioned have a tactical and strategic application of which you are obvious oblivious. All you can think about is agenda and what sounds good to your agenda centric mentality. Mak, maybe you should stick with your Facebook posts and leave the real thinking to higher level forums. You just subject the board to foolish postings of a tired and sick old man likely suffering onset dementia.
Cloud9 on Sun, 14th Jun 2015 7:27 am
Aircraft carriers and tanks are awesome force projection vehicles. Both of these systems are very dependent on air superiority, something we have enjoyed since the last year of WW II. It is possible to fight WW III with conventional weapons. Hitler declined to use his nerve gas on the Normandy Invasion. At that point it may have been impossible implement a gas attack due to the state of the Luftwaffe. Still it is possible for states to lose and not go nuclear.
If it were me, I would reset the game with an EMP strike.
Kenz300 on Sun, 14th Jun 2015 7:36 am
It is time to end the oil monopoly on transportation fuels…….
Buy an electric vehicle or better yet buy a bicycle or use mass transit.
No more WARS for OIL………..
Makati1 on Sun, 14th Jun 2015 8:35 am
Cloud9, your name seems to be appropriate. Do you actually think that WW3 will be fought with conventional weapons? LOL Not with the major nuke powers gearing up for an exchange.
Do you think that TPTB in the US are going to allow the Russian/Chinese to win and run the world? Or vice versa? If you do, you have not been paying attention.
The US already nuked an enemy to test their bombs and to try to put the fear into Russia. Didn’t work. The Russians had the bomb only a few years after Hiroshima. That is all that kept the US from trying to take Russia up until today’s stupidity. Desperation is the name of the game now. And desperation makes animals and humans do stupid things.
Davy on Sun, 14th Jun 2015 9:33 am
His Makster, the wanna-be military expert again opens his mouth with drivel and dumbness. Of course conventional weapons will be used in WWIII idiot amateur military non-thinker. NUKs may also be used you NUK destruction loving buffoon.
Makster, So little thought about the real world and so much sci-fi thought of a great game that is playing out in your mind like a cheap 80’s Hollywood film. The world is far more complicated then your tired old man brain can fathom. The US used NUK 70 years ago in a different world. You can rewrite history as usual and broadcast your agend as usual but just keep in mind it makes you look like a total fool.
Boat on Sun, 14th Jun 2015 2:38 pm
Regardless of the country the price of oil decides the price of about everything. Our immediate future of oil prices decides what gets shut down and what makes money when it comes to discretionary income after the oil bill has been paid.
Fracking seems to be a cheaper more controlled and more reliable source than much of off shore and tar sand oil. If demand continues to rise at a steady moderate rate who wins. Nat gas? Electric cars? Or does that need $100 per barrel of oil.
This ponzi scheme, is it real? Nobody made money when oil was at $90 when a lot of fracked wells are still producing at $60?
Will fracked oil become like Nat Gas and just produce more product with much fewer wells because of improved tech and eventually compete at scale with lower prices. Interesting times.
Makati1 on Sun, 14th Jun 2015 8:32 pm
Davy, my ‘tired old brain’ appears to be more open to reality than your narrow, brainwashed one. As for ability to see reality, you need new glasses or at least to take off the rose colored ones you wear, along with the blinders.
Go feed the chickens or something you might know about. Leave the real world to those NOT indoctrinated by the US MSM ‘patriotic’ bullshit. Duck & Cover!
OR will it be a swat team kicking down your door at 3 am some dark night because you are hoarding food or own a gun? LOL
apneaman on Sun, 14th Jun 2015 8:42 pm
It is not out of the realm of possibility that WWIII could be fought, won and done all in one afternoon.
Will we go out with a whimper instead of a bang? Cyberwar more likely than nuclear war.
http://energyskeptic.com/2013/cyberwar-richard-clarke/
Davy on Sun, 14th Jun 2015 8:50 pm
Man, give it a rest it is getting old. We were getting along fine until you decided to push my buttons. Give it a rest for the other here don’t worry about me. The forum tires of imbeciles fighting. A little is ok and interesting but eventually it is redundant.