• 4 minutes Trump will meet with executives in the energy industry to discuss the impact of COVID-19
  • 8 minutes Charts of COVID-19 Fatality Rate by Age and Sex
  • 11 minutes Why Trump Is Right to Re-Open the Economy
  • 13 minutes Its going to be an oil bloodbath
  • 19 mins Ten days ago Trump sent New York Hydroxychloroquine. Being administered to infected. Covid deaths dropped last few days. Fewer on ventilators. Hydroxychloroquine "Cause and Effect" ?
  • 5 hours US Shale Resilience: Oil Industry Experts Say Shale Will Rise Again
  • 19 hours While China was covering up Covid-19 it went on an international buying spree for ventilators and masks. From Jan 7th until the end of February China bought 2.2 Billion masks !
  • 10 hours Mr
  • 7 hours Free market or Freeloading off the work of others?
  • 7 hours China Takes Axe To Alternative Energy Funding, Slashing Subsidies For Solar And Wind
  • 8 hours Marine based energy generation
  • 20 hours What If ‘We’d Adopted A More Conventional Response To This Epidemic?’
  • 21 hours How to Create a Pandemic
  • 22 hours Apple to Bypass Internet and Beam Directly to Phones
  • 14 hours Which producers will shut in first?
  • 21 hours Real Death Toll In CCP Virus May Be 12X Official Toll

Breaking News:

WTI Slides On Huge Crude Inventory Build

Rakesh Upadhyay

Rakesh Upadhyay

Rakesh Upadhyay is a writer for US-based Divergente LLC consulting firm.

More Info

Premium Content

Oil Is Likely To Remain Below $50 A Barrel In The Near Future

Barring the sentimental uptick on an expectation of a production freeze in Algiers, the fundamentals of oil seem to be pointing towards another leg down. The International Energy Agency has gone ahead and reduced the global demand picture for this year and next.

The oil bulls have been advocating for higher oil prices, citing growing demand and a slowdown in supply. However, the recent IEA report suggests that the opposite is true: Oil demand is slackening, while production is on the rise.

During the third quarter of this year, oil demand growth slid to a two-year low of 0.8 million barrels a day. On the other hand, OPEC increased its output by 640,000 barrels a day since May. The main contributors to the rise are Kuwait, Saudi Arabia, and the United Arab Emirates.

Is there an opportunity for the demand forecast to be revised upwards?

The current global economic conditions don’t support a major upward revision in the global demand picture. Amid the debate about the limitations of the central banks and their monetary policies as well as a possible global economic slowdown, the demand picture for oil looks weak.

China and India have used low oil prices to shore up their Strategic Petroleum Reserves. However, as China doesn’t report its storage regularly, the data and the expectations of the experts are skewed.

While JP Morgan believes that the Chinese are close to topping up their SPR, Energy Aspects believes that new commercial storage capacity additions will sustain the increased demand from China. The difference between the two possibilities accounts for a huge difference of 1.1 million barrels a day.

Nevertheless, with reports of a likely debt crisis or a hard landing in China, chances are that the oil demand from the world’s second-largest economy will remain flat or see muted growth in 2017.

On the other hand, the OECD countries have stockpiled on crude, and the July figures reached 3.1 billion barrels, which is another damper to oil prices.

Though some optimistic bulls state that the long-term average of an increase in global demand for crude oil is 1.1 million barrels a day, they miss the point that since 2010, the demand growth skyrocketed to 1.5 million barrels a day.

Hence, an increase of 1.3 million barrels a day in 2016 and a further slowdown to 1.2 million barrels a day for 2017 shows that the demand growth is decreasing, even though crude oil prices have quoted below $50 a barrel for most of this year. Related: Is U.S. Shale Nearing Collapse?

“Recent pillars of demand growth China and India are wobbling. After more than a year with oil hovering around $50/bbl, the stimulus from cheaper fuel is fading. Economic worries in developing countries haven’t helped either. Unexpected gains in Europe have vanished, while momentum in the US has slowed dramatically,” the IEA report noted.

Even if we look at the possibility of a demand growth in 2018, the picture is not very promising. History suggests that the US is likely to enter a recession within the next two years. China’s borrowing-led growth is also not likely to sustain much longer and is prone to downside risks.

“There is a general gloom about the European countries right now, and Brexit is another nail in the coffin,” IEA senior economist Matthew Parry said in an interview, reports The Globe And Mail.

With every major global crude oil supplier, barring the US, is attempting to increase production and demand stuttering, it is time for the oil bulls to go back to the drawing board and reassess their figures. Unless we see a major oil disruption, oil supply will continue to outpace demand.

By Rakesh Upadhyay for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage






Leave a comment
  • adec on September 20 2016 said:
    Oil price has slammed the face of the author many times and it will do it again...

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News