• 11 hours PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 13 hours Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 15 hours Syrian Rebels Relinquish Control Of Major Gas Field
  • 16 hours Schlumberger Warns Of Moderating Investment In North America
  • 17 hours Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 18 hours Energy Regulators Look To Guard Grid From Cyberattacks
  • 20 hours Mexico Says OPEC Has Not Approached It For Deal Extension
  • 21 hours New Video Game Targets Oil Infrastructure
  • 23 hours Shell Restarts Bonny Light Exports
  • 24 hours Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 1 day Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 1 day British Utility Companies Brace For Major Reforms
  • 2 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 2 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 2 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 2 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 2 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 2 days Rosneft Signs $400M Deal With Kurdistan
  • 2 days Kinder Morgan Warns About Trans Mountain Delays
  • 2 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 2 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 3 days Russia, Saudis Team Up To Boost Fracking Tech
  • 3 days Conflicting News Spurs Doubt On Aramco IPO
  • 3 days Exxon Starts Production At New Refinery In Texas
  • 3 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 4 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 4 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 4 days China To Take 5% Of Rosneft’s Output In New Deal
  • 4 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 4 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 4 days VW Fails To Secure Critical Commodity For EVs
  • 4 days Enbridge Pipeline Expansion Finally Approved
  • 4 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 4 days OPEC Oil Deal Compliance Falls To 86%
  • 5 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 5 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 5 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 5 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 5 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 5 days Aramco Says No Plans To Shelve IPO
Alt Text

Clashes In Kurdistan Send Oil Prices Higher

Reports of skirmishes between Iraqi…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Key Signals That Oil Prices Are On The Up

Key Signals That Oil Prices Are On The Up

Oil prices are showing some signs of life as key indicators start pointing in a bullish direction.

One of the big indicators to watch that will determine which way oil prices are heading is the rate at which oil producers are storing oil. As U.S. shale production surged in recent years, and demand began to slow, oil was increasingly diverted into storage. The U.S. saw oil stockpiles explode to their highest level since at least World War II over the last six months.

USCrudeOilStocks

The big question is when demand will sufficiently pick up and/or supply will sufficiently decrease so that those inventories stop rising. The speed with which inventories are increasing has indeed slowed a bit. Two weeks ago, there was a rise of just 1.3 million barrels, one of the lowest levels in months. Related: How Shale Is Becoming The .COM Bubble Of The 21st Century

PIRA Energy Group, an energy research firm, is convinced that the oil markets have turned a corner. “PIRA believes that vast majority of the bearish news is already out and that the price lows for global crude oil markers are in,” the company wrote in its weekly energy recap. PIRA predicts that the oil stock build will peak in May and then start to decline somewhere between June and August. U.S. oil production is already showing signs of decline, demand is picking up, and even a flood of Saudi oil has been swallowed by markets. Oil prices have risen by nearly 30 percent since March, and have appeared to stabilize for the time being (WTI in the mid-$50s and Brent in the mid-$60s). “The magic of price is working to tighten oil markets and higher oil prices are in the offing,” PIRA concluded.

Another indicator to watch is the price of refined products versus the price of crude oil. If the spread between the two widens, as it has in recent weeks, that suggests that consumers are using more gasoline and crude oil prices have not caught up. Driving season in the U.S. is drawing near, so demand for more refined products will continue to rise. That should put some upward pressure on crude oil. Related: Low Oil Prices Could Destabilize Financial System

Of course, there are countervailing data that push back the idea that oil prices will continue to rebound. There is a backlog of wells waiting to be completed – a “fracklog” – that will bring a rush of new production online when completed. WTI rising to $65 per barrel could result in an additional 500,000 barrels per day in production. Bloomberg Intelligence says that there are more than 4,700 wells awaiting completion. If and when they are brought online, WTI could drop once again.

Then again, supply and demand fundamentals are obviously not the only determinants. Geopolitics has a way of upending any carefully crafted projection. Iran reportedly fired shots across the bow of a cargo ship near the Straits of Hormuz. One of the most critical waterways for oil trade in the world, the Straits of Hormuz is a mere 21 miles wide at its narrowest point. An estimated 17 million barrels flow through the narrow passage out of the Persian Gulf, or 30 percent of the global maritime oil trade. Iran seized a cargo ship that hailed from the Marshall Islands, and although fears subsided after it became apparent that it was not targeting a U.S. ship, the U.S. Navy did send a Destroyer to patrol the waters.

StraitsOfHormuz Related: We Are Witnessing A Fundamental Change In The Oil Sector

The incident did not have a major effect on oil prices, but is illustrative of what a major market mover could look like. Geopolitical events can act with utter surprise that could take oil markets by hold at a moment’s notice.

We had another “above ground” example in the past week. Striking workers at a key oil field in Libya shut down production. Although some Libyan fields have been hit by violence, the latest dispute was one over wages. The El Feel field, with a capacity of 140,000 barrels per day in production, was briefly shut down due to the strike, but has since restarted. Libya, though, is still only producing about 250,000 barrels per day, sharply lower than its 1.6 million-barrel-per-day potential.

Oil prices have sort of plateaued after rising from their March lows. The path forward from here, though, is unclear, but the latest data points to a higher prices in the weeks and months ahead.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • bryon on May 02 2015 said:
    For how long
  • Chunde Shi on May 03 2015 said:
    The author would be more creditable if world oil supply, demand, storage are covered, not just U.S.
  • avenger426 on May 04 2015 said:
    Oil goes up, demand goes down. Basic economics. High oil destroyed the world economy.

Leave a comment




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