Global oil markets could “drown in oversupply,” sending prices even lower as demand growth slows and Iran revives exports with the end of sanctions, according to the International Energy Agency.
The IEA trimmed 2016 estimates for global oil demand as China’s economic expansion weakens and raised forecasts for supplies outside the Organization of Petroleum Exporting Countries. While non-OPEC supply is set to drop 600,000 barrels a day in 2016, Iran’s comeback could fill that gap by the middle of the year. As a result, world markets may be left with a surplus of 1.5 million barrels a day in the first half.
“While the pace of stock-building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in oversupply,” said the Paris-based adviser to industrialized economies. Prices “could go lower.”
Oil sank to a 12-year low of less than $28 a barrel in London on Monday as the removal of international sanctions over the weekend freed Iran to revive crude exports, threatening to swell a glut created by fellow OPEC members and U.S. shale drillers. Saudi Arabia, the biggest oil exporter, signaled again on Sunday it won’t relent in its strategy to preserve market share even as prices crash.
Iran Growth
Iran could be the only source of supply growth in OPEC this year as a surge in Iraq fizzles out, the IEA said. International sanctions, including those on its oil sector, were lifted on Jan. 16 as Iran met the terms of an agreement to curb its nuclear development program.
The Persian Gulf exporter could add 300,000 barrels a day by the end of the first quarter and 600,000 barrels a day by the middle of the year, the IEA said. While that’s below official ministry plans to add 1 million a day by mid-year, it could still be enough to pressure prices further, the agency predicted. The country pumped at a 3 1/2-year high of 2.91 million barrels a day in December, according to the report.
Global oil demand growth slipped to a one-year low in the fourth quarter, from close to a five-year high in the third, amid mild winter temperatures and economic weakness in commodity producers. Consumption growth will slow this year to 1.2 million barrels a day, or 1.3 percent, from 1.7 million a day in 2015, according to the report, averaging 95.7 million barrels a day.
OPEC Supply
While supplies outside OPEC proved “resilient” for most of last year, they shrank on an annual basis in December for the first time in three years, according to the IEA. The projected drop of 600,000 barrels a day in non-OPEC production this year will be the steepest since 1992.
Production from OPEC, whose membership expanded last month with the return of Indonesia, slipped 90,000 barrels a day to 32.28 million a day in December amid slightly lower output from Saudi Arabia and Iraq, according to the report. That’s still about 600,000 a day more than the average of 31.7 million required in 2016.
With OPEC supply potentially expanding and demand growth slowing, global inventories could accumulate by a further 285 million in 2016 after swelling by 1 billion barrels last year, the IEA said. As the availability of storage on-land becomes tighter, that could make it profitable to stockpile excess crude on tankers at sea, the agency said.
makati1 on Tue, 19th Jan 2016 5:57 am
Peak oil is slamming up against peak ability to buy/consume. Soon the Us money printing presses will be smoking to keep up with the declining tax income and the increasing costs to keep the sheeple happy and off the streets.
The KSA is not the only country that has problems paying off it’s citizens to keep it’s royal heads on it’s royal shoulders with ever decreasing income. The KSA has it easy as it’s citizens do not have more guns than it’s military and police combined.
Fudging the numbers only works until it becomes impossible to hide the problem. Zimbabwe, here we come! LOL
makati1 on Tue, 19th Jan 2016 6:06 am
In other news for those behind the US MSM Iron Curtain:
“Algeria, China ink $3.3 bn mega port deal”
“Trade, investments high on Xi agenda in Egypt”
“China, Russia helping Zimbabwe ride out West’s bullying”
“Grateful for Russia, China support: Iraqi ambassador”
“Russian supply of Su-35 fighter jets to China in last quarter of 2016”
“Energy, Syria, terrorism focus of Putin-Qatari Emir talks”
http://thebricspost.com/
Movin’ on down…
markisha on Tue, 19th Jan 2016 7:03 am
When IEA predict it must be for sure hahahahahah
Davy on Tue, 19th Jan 2016 8:14 am
This is coming down to demand at this point. Demand is being destroyed from a combination of several macro forces that cannot be reversed. You cannot patch up deflating bubbles. One small bubble maybe but multiple global bubbles no especially after all the tools and ammo have been used by TPTB already in the last downturn. These bubbles were inflated by force and they will deflate by force. These bubbles may pop in an ugly way because human nature involves the irrationals of panic.
This is an economic issue foremost in the immediate time frame. It is a product and result of the 08 crisis and its policy response. It has been predicted so many times that we as a global system were digging our grave with excessive global QE and rate repression. We should be more accepting of what is happening now yet, denial and moral hazard is now systematic. It appears all anyone knows is “MOHR” instead of “LESS”.
The malinvestment of overcapacity and bubble like asset and commodity inflation occurred everywhere but was concentrated in property development especially in China and a lesser extent in US retail. It occurred in the industrial sector supporting China’s property boom. It occurred in the commodity sectors especially oil. It occurred within the financial markets especially equities but now increasingly in the bond market in China. Shadow banking excesses, rehypothecation of collateral values, excessive margin and leverage activity, and extend and pretending away non-preforming loans became an acceptable moral hazard that is now no longer possible. In the US stock buy backs and mergers became the way you inflate stocks with easy money instead of real growth in productive assets. Rational price discovery was gutted in the name of yield seek.
The list goes on and on with poor behavior that is now converging into recessionary environments. These instabilities and disequilibrium’s of excess and moral hazards have now moved into the huge and volatile foreign exchange markets with the dollar and Chinese yuan. This is knocking on into the resource republics and the emerging markets currencies. Once the huge carry trade activities start to go dysfunctional and zero sum game currencies wars snowball we are talking forces that cannot be controlled. This will be a unwind of global proportions affecting every nation.
Once confidence in global trade is damaged and deflationary momentum fully in place without central bank forces to offset extremes we are talking a vicious economic cycle down of demand destruction. Meat is going to be cut not just fat. The meat that is most important in regards to future global growth is the oil industry. Once macro global supply infrastructure is cannibalized and new projects gutted we are going to be at a situation of supply at decade’s lower supply level potential with a much higher populations and consumption requirements.
This will be a huge event at some point because we will have dropped to a lower activity level without the corresponding adjustments to the socio-economic realities. It is likely this demand destruction tsunami will at some point put the global system and its status quo mentality to the test. Crisis is going to result globally because supply of goods and services and confidence in currency and credit will be severely damaged. Our system cannot survive this situation very long. How long is anyone’s guess and how this will play out is likewise uncertain but it seems clearer by the day from those of us with an understanding of economics, finance, and oil sector this could be the end of the status quo as we know it.
roccman on Tue, 19th Jan 2016 8:36 am
“Once the huge carry trade activities start to go dysfunctional and zero sum game currencies wars snowball we are talking forces that cannot be controlled. This will be a unwind of global proportions affecting every nation.”
That will drive the next round of consolidation…fewer banks – energy firms – technology firms – food firms – nations as vassal states to “others”.
Fairly predictable
geopressure on Tue, 19th Jan 2016 8:52 am
That’s a very misleading chart…
Davy on Tue, 19th Jan 2016 9:08 am
“Why This Slump Has Legs”
http://www.theautomaticearth.com/2016/01/why-this-slump-has-legs/
”The slump will not be over for a very long time, there will be no rebound or recovery, and please stop talking about a return to growth unless you can explain what you want to grow into.”
“That you believed this was actual growth, however, is on you. You fell for a scam and you’re going to have to pay the price. If there’s one single thing people are good at, it’s lying”
“But it’s another thing that has happened since 2008, or rather not happened, that points out to us why this slump will have legs. That is, in 2008 a behemoth bubble started bursting, and it was by no means just US housing market. That bubble should have been allowed to fully deflate, because that is the only way to allow an economy to do a viable restart.”
“Instead, all that has been done since 2008, QE, ZIRP, the works, has been aimed at keeping a facade ‘alive’, and aimed at protecting the interests of the bankers and other rich parties. “
“It was all paid for, apart from western QE, with $28 trillion and change of newfangled Chinese debt. The problem with this is that if you find yourself in a bubble and you don’t go through the inevitable deleveraging process that follows said bubble in a proper fashion, you’re not only going to kill economies, you’ll destroy entire societies.”
“There’s been no deleveraging, the no. 1 requirement after a bubble bursts. There’s only been more leveraging, more debt has been issued”
“Next, China. What we’re looking at is what allowed the post 2008 global economic facade to have -fake- credibility, an insane rise in debt, largely spent on non-productive overinvestment, overcapacity highways to nowhere and many millions of empty apartments, in what could have been a cool story had not Beijing gone all-out on performance enhancing financial narcotics.”
“Today, the China Ponzi is on its last legs, and so is the global one, because China was the last ‘not-yet-conquered’ market large enough to provide the facade with -fleeting- credibility.”
“So US debt will have to come down too, belatedly, with China, and it will have to do that now because there are no continents to conquer and hide the debt behind. We’re all going to regret engaging in the debt game, and not letting the bubble deflate in an orderly fashion when we still could, but all those thoughts are too late now.”
“China bad loans have now become a theme, but the theme doesn’t mean a thing without including the shadow banking system, which in China has been given the opportunity to grow like a tumor”
“keeping their role hidden is one of Xi’s main goals, lest the people find out how bad things really are and start revolting. But they will anyway. That makes China a very unpredictable entity. And unpredictable means volatile, and that means even more money flowing out of, and being lost in, markets.”
shortonoil on Tue, 19th Jan 2016 9:43 am
The world had 4,200 Gb of liquids produced by something dying, getting buried, and then cooked for a few million years. 60% of that 4,200 Gb was as useful as a dish of last week’s guacamole; the world burned most of the other 40%. There is a concept that the EIA needs to be introduced too; its called depletion. It is no surprise that they missed it; it is only a couple thousand years old! The world is surely swimming in something, but it is hard to tell what it is? It could be oil, or maybe it is just last week’s guacamole?
http://www.thehillsgroup.org/
Plantagenet on Tue, 19th Jan 2016 9:45 am
Is there anyone left posting here who still doubts that the world is in an oil glut?
And are they the same people who still think the world is flat?
Hahahahahahahahahahahah!
Cheers!
Dredd on Tue, 19th Jan 2016 9:58 am
The seaports are slowly drowning as civilization quickly drowns in oil poisoned brains (The Question Is: How Much Acceleration Is Involved In SLR – 9?).
ennui2 on Tue, 19th Jan 2016 10:01 am
Planty, the answer is yes. There are knee-jerk accusations that the IEA charts are wrong, despite the fact you can go down to your local gas station and verify it for yourself.
shortonoil on Tue, 19th Jan 2016 10:09 am
“That’s a very misleading chart…”
Sure it is; we all know that crude prices are going up! Just inflation adjust that chart back to 1873, and see what you get? Better yet, use Zimbabwean dollars back to 1936. There is some economist at the FED who could use seasonal adjustments, hedonics, adjust for the weather and wind direction, and make it look like Santa showed up 12 times last year.
The price of oil has crashed, and it is never coming back!
ghung on Tue, 19th Jan 2016 10:30 am
@Plant; Is there anyone left posting here who cares about your little oil glut agenda?
shortonoil on Tue, 19th Jan 2016 10:33 am
“Planty, the answer is yes. There are knee-jerk accusations that the IEA charts are wrong, despite the fact you can go down to your local gas station and verify it for yourself.”
Who exactly said that the chart was wrong? Of course it isn’t; its called the end of the oil age. It is the point where the average producer can no longer make money discovering, developing and pumping oil. That happens to be – right now!
Definition: “an oil glut”. Oil that was not worth taking out of the ground to begin with, but was taken out anyway! A synonym with Central Bank shenanigans, or how to finance economically nonviable alternatives with heaps of fake money to paper over a real dilemma.
Boy — is there a glut!
marmico on Tue, 19th Jan 2016 11:10 am
The quart shy of oil is a fuctard.
His ETP model fails his own empirical test.
Now he thinks he is a guru and the Cro-Magnons lap it up.
apneaman on Tue, 19th Jan 2016 11:18 am
planty, how much extra/glut is there compared to the non glut days of yore?
Where actually is that much-hyped global oil glut?
“We see that oil stocks in the period 2009 (light blue line) to 2013 (dotted line) varied between 2,6 bn and 2.8 bn barrels along with seasonal changes. The average stocks for this time of the year is 2.7 bn barrels. We can consider this range as the result of normal operating conditions allowing for accidents, refinery maintenance, transport disruptions, strikes etc but also demand side changes from a weak economy (2009) to high oil prices (2013).
Therefore, that magic glut is 3 bn – 2.7 bn = 300 million barrels or roughly 10% of the average. The long term trend of OECD stocks is shown in the next graph”
http://crudeoilpeak.info/where-actually-is-that-much-hyped-global-oil-glut
apneaman on Tue, 19th Jan 2016 11:22 am
marmi has a micro penis. That’s why he’s so bitter.
marmico on Tue, 19th Jan 2016 11:32 am
The quart shy oil fails his own “weenie” empirical test.
For the umpteenth + 7 times, please help the quart shy cite credible evidence that it takes 48,900 Btus to refine one gallon of oil.
Other wise, he is full of shit. How are the fires going. 🙂
rockman on Tue, 19th Jan 2016 11:41 am
OK let’s try this approach to the oil “over supply” debate. Let’s began with the proposition that there is an oversupply at the current global production rate. The EIA estimates that the average rate during 2015 was 93.8 million bopd.
OK all you oversupplynicks: what should the average 2015 oil production rate have been if it had balanced with the demand? So it should be an easy answer, right? IOW how much oil should we be producing now to not have an “over supply” of oil?
Come on now, let’s hear it: how much should the current oil rate be reduced to eliminate the “over supply” situation? There has to be a specific number because if there wasn’t how would you know that the world is currently being “over supplied”.
marmico on Tue, 19th Jan 2016 11:48 am
how much should the current oil rate be reduced to eliminate the “over supply” situation?
1.2 mb/d. Then there is the inventory drawdown which will take 9 months.
dave thompson on Tue, 19th Jan 2016 11:53 am
Our only hope is helicopter money on main street from above.
geopressure on Tue, 19th Jan 2016 11:59 am
Rockman: You are overlooking the US’s use of the SPR Volume in 2014 & 2015…
How is it that oil was $100/BBL when the “Surplus” Volume started filling the tanks??? How is that none of the oil analyst & futures traders foresaw this new supply supply before it appeared in the commercial storage tanks? They didn’t see it because the surplus oil did not come from real projects, it came from the SPR…
How is it that when the “Glut” started, Iraq, Iran & Libya were all producing next to nothing, while China & India & Indonesia were consuming more & more than they ever had… Yet there is a supposed “Glut”???
People are too fast to believe the media…
Davy on Tue, 19th Jan 2016 11:59 am
“Canada Set To Unleash Negative Rates As Oil Patch Dies, Depression Deepens”
http://www.zerohedge.com/news/2016-01-19/canada-set-unleash-negative-rates-oil-patch-dies-depression-deepens
“The question for the Bank of Canada is this: is the risk of an even weaker loonie worth taking if a rate cut has the potential to head off the myriad risks facing the economy?”
“JP Morgan’s Daniel Hui says CAD needs to fall further lest producers should simply close up shop. “[W]ith West Canada Select (WCS) now sitting just a dollar above the average per-barrel operational cost of $20 (Canadian), the risk is that any further decline will cause a whole new host of spillovers including potential shutdown and retrenchment of energy extraction and exports (with its attendant growth and balance of payment effects) or the potential of highly leveraged companies running operational losses, and the more contagious financial impact that might have in Canada, with broader spillovers.”
“But this is a Catch-22. The BOC can cut and drive the loonie even lower thus allowing zombie producers to keep pumping and thus prevent still more oil patch job losses, but a falling CAD may have undesirable knock-on effects, like reduced consumer spending, for instance. Additionally, if uneconomic producers keep drilling and pumping, they’re just digging their own grave by contributing to an already oversupplied global market.”
“For their part, IceCap Asset Management says NIRP is a virtual certainty for the BOC. Here’s IceCap’s straightforward, bullet point roadmap for Canadian monetary policy:
Canadian economy to be in recession in 2016
Bank of Canada will be at 0% interest rates in 2016
Bank of Canada will be at NEGATIVE interest rates in later 2016
Bank of Canada will be PRINTING MONEY in later 2016”
geopressure on Tue, 19th Jan 2016 12:02 pm
Ennui2: “Planty, the answer is yes. There are knee-jerk accusations that the IEA charts are wrong”
—
I said that the above price chart is very misleading – which it is… I didn’t say that it was incorrect…
—
Though any EIA data that involves a volume or a production rate should be questioned…
geopressure on Tue, 19th Jan 2016 12:07 pm
If there is an oversupply, then why is half of the world unable to acquire oil to feed their refineries? It just happens the half of the world that the media does not really care about…
Davy on Tue, 19th Jan 2016 12:12 pm
“Hedge Fund That Called Subprime Crisis Says Yuan Should Fall 50%”
http://www.bloomberg.com/news/articles/2016-01-19/hedge-fund-that-called-subprime-crisis-says-yuan-should-fall-50-
“Mark Hart, the hedge fund manager whose bets against U.S. subprime mortgages and European sovereign debt proved prescient, said China should weaken its currency by more than 50 percent this year.”
“A one-off devaluation would allow policy makers to “draw a line in the sand” at a more appropriate level for the yuan, easing pressure on China’s foreign-exchange reserves and removing an incentive for capital outflows, according to Hart, who’s been betting against the currency since at least 2011. China should devalue before its $3.3 trillion hoard of reserves shrinks much further, he said, because the country can still convince markets it’s acting from a position of strength.”
“China’s current approach to managing the currency’s decline has been costly. Foreign-exchange reserves dropped by a record $513 billion last year as the central bank intervened to ease the currency’s slide, while an estimated $843 billion of capital flowed out of China in the 11 months through November as some investors sought to get in front of further yuan weakness.”
“They’re trying to drive a car with one foot on the brake,” said Hart, who estimates the People’s Bank of China spent more than $100 billion supporting the yuan in onshore and offshore markets during the first 12 days of January.”
apneaman on Tue, 19th Jan 2016 12:21 pm
Pure Fiction: The Errors in the IEA Monthly Forecast (July 13, 2015)
“The title of this Notes at the Margin is deliberately provocative. Last Friday the International Energy Agency issued its July 2015 Oil Market Report (OMR). Those who suffer from high blood pressure and/or who believe the oil market is tightening should not read it lest they suffer a stroke or coronary. The document is rife with inaccuracies. Furthermore, the authors seem to exhibit the standard bureaucratic attitude in their presentation: “We know everything and we never make mistakes.” Unfortunately, the IEA is seldom right. In this week’s Notes at the Margin we highlight some of the important mistakes in the IEA’s July 2015 report”
http://www.pkverlegerllc.com/publications/notes-at-the-margin/pure-fiction-the-errors-in-the-iea-monthly-forecast-july-13-2015-1574/
Forecast errors in IEA-countries’ energy consumption
http://www.ingentaconnect.com/content/els/03014215/2002/00000030/00000001/art00059
EA Underestimates Renewables, Overestimates Fossils
http://climatenexus.org/learn/solutions-policy/iea-underestimates-renewables-overestimates-fossils
shortonoil on Tue, 19th Jan 2016 12:21 pm
“Therefore, that magic glut is 3 bn – 2.7 bn = 300 million barrels or roughly 10% of the average. The long term trend of OECD stocks is shown in the next graph”
300 million barrels at today’s price is about $9 billion, or 0.9% of the yearly revenue stream for the industry. Unless one has a religious devotion to the Supply/Demand concept it is absurd to believe that 0.9% reduced prices by 70%. Obviously, the market sees something else happening, and it is just what we have been projecting for some time. The Etp Model indicates, based on the energy dynamics of the situation, that the consumer economy will never again be able to absorb all the petroleum that is produced. The energy to produce it and its products is greater than the energy that is deliver to the Non Energy Goods production sector of the economy. The NEGs can not give back to the Petroleum Producing Sector (PPS) enough energy to produce all of the petroleum. The balance must be made up through debt formation; the PPS must now constantly acquire energy from other sources.
This situation will not; can not alleviate itself. The energy to produce petroleum and its products is increasing, and has been increasing since the first barrel of oil was ever taken out of the ground. It will continue to increase until the last barrel has been extracted. That is about 77,800 BTU per barrel per year. It is also the bases for the $39 trillion estimate that will be needed by the industry to keep producing petroleum for the next decade.
For investors in the petroleum industry it is a red flag that the rules have now been changed. It they don’t understand the new rules, they are more than likely to wind up loosing their shirt.
http://www.thehillsgroup.org/
geopressure on Tue, 19th Jan 2016 12:34 pm
According to Raymond James, The IEA’s Demand Forecast have been at least 700,000 BOPD LOW for the last 15 years… That’s pretty consistent, at least…
The EIA 2nd Quarter 2015 Report included a 1.7 Million BOPD “PLUG” in order to get their numbers to work out… This suggest that their 2015 estimated demand is about a Million BOPD higher than usual…
A “PLUG” is Accountant lingo for “The numbers don’t even out”… Both the IEA & EIA use them…
Here’s an interesting short video that discusses the missing BBLs: https://vimeo.com/album/3669893/video/145236378
marmico on Tue, 19th Jan 2016 12:43 pm
The EIA 2nd Quarter 2015 Report included a 1.7 Million BOPD “PLUG” in order to get their numbers to work out
Huh. So you are saying that the EIA career data statisticians are such bozos that the refineries perjured their runs.
Every post you make you become more moronic.
geopressure on Tue, 19th Jan 2016 12:49 pm
“Plugs” are a fact of life, Marmico… That is why Accountants have the term “Plug”…
I think your above post confuses the EIA & IEA, but both of them use Plugs…
See Line #13 of the U.S. Petroleum Balance Sheet which is reported Weekly from the EIA…
http://www.oilvoice.com/n/Why-Ive-Started-Buying-Oil-Stocks-Again/f3e63f2c427b.aspx
marmico on Tue, 19th Jan 2016 12:58 pm
“Plugs” are a fact of life, Marmico
Sure. Plugs are accounting rounding errors, not 10% of refinery run rates.
Let me repeat: So you are saying that the EIA career data statisticians are such bozos that the refineries perjured their runs.
geopressure on Tue, 19th Jan 2016 1:20 pm
It’s not me saying it, It’s Tudor, Pickering, Holt…
https://vimeo.com/album/3669893/video/145236378
geopressure on Tue, 19th Jan 2016 1:25 pm
I’m Saying that the IEA (Which you keep getting confused with the EIA) has Underestimated Demand every year for the last 15 years by an average of 700K BOPD… This is based upon the IEA’s own revisions…
The IEA’s 2nd Quarter 2015 report included a 1.7 Million BOPD PLUG… This suggest that they have underestimated demand by way more than 700K BOPD in 2015… Probably 2016 too…
Theses are FACTS straight off the IEA’s own reports Revisions…
Tom S on Tue, 19th Jan 2016 2:02 pm
Hi Rockman,
It’s hard to say exactly how much the world is oversupplied because you’d need to know exactly how much world demand exists at various prices, and what the marginal cost is per barrel at those prices is right now.
Just looking at charts of daily production and price, I’d estimate the oversupply is about 1-2 million bbl/day. It’s definitely more than 300,000 bbl/day, because that is the excess amount of oil being added to storage beyond typical inventory, and prices are still insufficient to support the marginal producer. However, it’s definitely less than 3 million bbl/day, because that is the amount that production has increased over the last few years, and consumers were willing to pay $100/bbl at the lower level of production, which is more than enough to support the marginal producer now, and I assume that demand has increased modestly since that time.
There is an area of uncertainty here, because it depends somewhat on consumer behavior which is changing. The average Chinese person makes a few hundred dollars (USD) more per year now, compared to a year ago. How much of that would they be willing to spend on oil at various prices? They’ve never been tested on that point, since the oil market has been in a glut for the entire time they’ve had that few hundred additional dollars per person, so who knows what they would do with it. If the Chinese people who own cars are prepared to go crazy and spend all of their newfound money on gasoline, it’s possible that the oversupply is actually less than 1 million barrels per day.
-Tom S
Nony on Tue, 19th Jan 2016 3:00 pm
The world is oversupplied with $40 oil and undersupplied with $20 oil. Duh.
This fetish with the inventory variation is silly. Over time any inventory increase or decrease will get worked down to average operational levels. What matters is the fundamental supply and demand (and I mean P-Q, not inventor balance).
There is no such thing as a glut or a shortage or oversupply or undersupply in free trading markets. There is just the price.
Davy on Tue, 19th Jan 2016 3:17 pm
NOo, what about price in an environment of dysfunctional price discovery? Is there still just the Price? Does that mean fundamentals don’t matter because the price is the price. Sometimes systems break and quit working. We are approaching something like that currently and not a cavalier “Price”. There is more to an economy than price.
shortonoil on Tue, 19th Jan 2016 3:55 pm
“Just looking at charts of daily production and price, I’d estimate the oversupply is about 1-2 million bbl/day.”
Between 02/21/14 and 12/25/15, 673 days, US crude stocks less SPR increased by 276,626 Mb (277 mb), or 404,091 b/day. Considering that almost all of the additional production of the world has come from North America over the last seven years it is reasonable to assume that excess production is less than half a million barrels per day. Additional finished product export by the US added 968 b/d on average between 01/07/14 to 01/01/16 or 725 days.
http://www.eia.gov/dnav/pet/pet_stoc_wstk_dcu_nus_w.htm
http://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm
The null hypothesis that excess production is 1 mb/d or more is shown to be wrong within any reasonable margin of error (6 standard deviation units). Excess production is likely to be less than 1/2 a million barrels per day.
Tom S on Tue, 19th Jan 2016 5:11 pm
Hi short,
I’m not talking about crude stocks here. That’s not the same thing as market oversupply.
I’m referring to the amount that supply would need to decline, or demand increase, until they are balanced again. They are balanced when prices have increased by enough that marginal producers are no longer contracting their production.
It’s not the same thing as crude stocks. Crude stocks are a lower bound for how much the market is oversupplied.
-Tom S
Tom S on Tue, 19th Jan 2016 5:15 pm
Oops, I meant to say that the increase in crude stocks is a lower bound.
-Tom S
shortonoil on Tue, 19th Jan 2016 6:18 pm
“I’m referring to the amount that supply would need to decline, or demand increase, until they are balanced again.”
To get back to this graph, 2016, WTI $66:
http://www.thehillsgroup.org/depletion2_022.htm
Production would have to decline by a little over 1.0 mb/d, 1.0%. Demand won’t increase because production is going down. $30 oil guarantees that. Any price over $66 will destroy enough demand to bring it back to $66.
Davy on Wed, 20th Jan 2016 5:41 am
Oil is not likely to recover until this mess stabilizes. What is going on with oil now is more than oil.
“Shanghai Opens Below 3,000 As Animal Spirits Leave The Building: Longest Margin Debt Drop In 6 Months”
http://www.zerohedge.com/news/2016-01-19/shanghai-opens-below-3000-longest-margin-debt-losing-streak-6-months-overnight-repo-
“More troubling for China’s market manipulators is that they will very quickly and aggressively need to get involved today if they wish to prop up the market, now that the animal spirits are officially gone.”
“According to Bloomberg, the outstanding balance of Shanghai margin debt dropped for 13th consecutive day on Tuesday…..This was the longest losing streak in 6 months as the public now leave the market bubble in droves.”
“At this point it is practically impossible to track all the Chinese market breakages, which like connected vessels appear at the most random of places, and the moment one hole is patched up, another immediately takes its place.”
shortonoil on Wed, 20th Jan 2016 8:08 am
“Oil is not likely to recover until this mess stabilizes. What is going on with oil now is more than oil.”
Oil will never recover. The price may go up a little from where it is presently, but its long term trend is downward. Depletion assures that its cost of production will increase until it is no longer worth taking out of the ground. The world is now only a very few years away from that time.
This will be evident from declining profits, insufficient cash flow, and declining production in the petroleum industry. Those are already occurring at present. As the petroleum industry begins its shut down phase the remainder of the world’s economy will shut down with it. The world’s vast integrated economic network will experience paralyzes, and then death. We will be able to watch it happening day after day as one institution after another crosses an event horizon, and recedes into oblivion. The oil age is ending! The world has yet learned how to cope with its demise.
makati1 on Wed, 20th Jan 2016 8:50 am
Short, I agree, not that it matters. This has been obvious since at least 2008.