Oil Deficit by Mid-Year? | Russell T. Rudy Energy LLC
The global oil glut has been with us for so long that we are starting to assume that it is part of the long-term energy landscape. This oversupply has hung like the Sword of Damocles over oil markets and is a strategic threat to any sustained improvement in oil prices. However, “Rigzone” reports that no less an authority than the International Energy Agency (IEA) predicts that the demand for crude could surpass supply in the first half of this year.
This is pretty remarkable as the IEA does not anticipate any additional growth in demand since its last report. Rather, it bases its forecast on the compliance of OPEC, Russia, Mexico and Kazakhstan with agreed upon production cutbacks. When these production quotas were announced late last year, many industry observers, including myself, were very skeptical about compliance. However, the IEA notes that in February, the parties to the agreement were 91% compliant and indications are that this will improve throughout the first half of this year. The Saudis appear to be especially conscientious in complying with their quota and even seem willing to extend the cutback agreement beyond its original term of 6 months.
It should be noted that the IEA seems more bullish than OPEC regarding compliance with quotas. However, this could be an attempt by the cartel to scare fellow signatories to the agreement into stricter compliance.
Nevertheless, the IEA observed “If current production levels were maintained to June when the output deal expires, there is an implied market deficit of 500,000 bpd (barrels per day) for 1H17, assuming, of course, nothing changes elsewhere in supply and demand.”
However, this is a huge assumption, given the run-up in drilling activity in the U. S. and the widespread belief that domestic shale oil production will continue to surge throughout the year.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/148853/IEA_Says_Oil_Market_Could_Tilt_Into_Deficit_In_1H_If_OPEC_Sticks_To_Cuts/?all=HG2 .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
