At the Bottom? | Russell T. Rudy Energy LLC
“World Oil” reports that the International Energy Agency (IEA) thinks that oil prices might be turning the corner. Increasing demand, falling inventories, and production declines both within, and outside of, OPEC, could lead to a price recovery by the second half of this year.
The IEA anticipates global demand rising by 1.2 million barrels of oil per day (bopd) in the last half of 2016. This could lead to a reduction in the global surplus from its current level of 1.7 million bopd, to 200,000 bopd within that time frame. However, the agency cautions that as U. S. crude and gasoline prices recover, demand increases could be less than predicted.
Oil inventories in the developed economies dropped in February for the first time in a year. Inventories are a key indicator for many industry observers, and this bodes well for a price recovery.
OPEC production slipped by 90,000 bopd in February, to 32.61 million bopd. While Iran said it would increase production by 500,000 bopd as soon as sanctions were lifted, their output only is up 220,000 bopd. This increase was more than offset by production declines in Iraq, Nigeria and the United Arab Emirates.
The IEA also predicts that output will be down in non-OPEC countries, led by a 530,000 bopd decrease in the U. S. Production in Brazil and Colombia is expected to drop as well.
If the IEA is correct, we could see price recovery beginning in the second half of this year.
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/3/11/oil-price-may-have-bottomed-as-high-cost-producers-cut-says-iea .
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