• 1 day Shell Oil Trading Head Steps Down After 29 Years
  • 2 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 2 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 2 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 2 days Venezuela Officially In Default
  • 2 days Iran Prepares To Export LNG To Boost Trade Relations
  • 2 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 2 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 2 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 3 days Rosneft Announces Completion Of World’s Longest Well
  • 3 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 3 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 3 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 3 days Santos Admits It Rejected $7.2B Takeover Bid
  • 3 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 3 days Africa’s Richest Woman Fired From Sonangol
  • 4 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 4 days Russian Hackers Target British Energy Industry
  • 4 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 4 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 4 days Lower Oil Prices Benefit European Refiners
  • 4 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 5 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 5 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 5 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
  • 5 days Shell: Four Oil Platforms Shut In Gulf Of Mexico After Fire
  • 5 days OPEC To Recruit New Members To Fight Market Imbalance
  • 5 days Green Groups Want Norway’s Arctic Oil Drilling Licenses Canceled
  • 5 days Venezuelan Oil Output Drops To Lowest In 28 Years
  • 5 days Shale Production Rises By 80,000 BPD In Latest EIA Forecasts
  • 6 days GE Considers Selling Baker Hughes Assets
  • 6 days Eni To Address Barents Sea Regulatory Breaches By Dec 11
  • 6 days Saudi Aramco To Invest $300 Billion In Upstream Projects
  • 6 days Aramco To List Shares In Hong Kong ‘For Sure’
  • 6 days BP CEO Sees Venezuela As Oil’s Wildcard
  • 6 days Iran Denies Involvement In Bahrain Oil Pipeline Blast
  • 8 days The Oil Rig Drilling 10 Miles Under The Sea
  • 9 days Baghdad Agrees To Ship Kirkuk Oil To Iran
  • 9 days Another Group Joins Niger Delta Avengers’ Ceasefire Boycott
  • 9 days Italy Looks To Phase Out Coal-Fired Electricity By 2025
Alt Text

Oil Prices Nosedive On Bearish IEA Report

Oil prices are cratering after…

Alt Text

The IEA Is Grossly Overestimating Shale Growth

The IEA’s forecast that U.S.…

Arthur Berman

Arthur Berman

Arthur E. Berman is a petroleum geologist with 36 years of oil and gas industry experience. He is an expert on U.S. shale plays and…

More Info

Why We Should Get Used To Low Oil Prices

Why We Should Get Used To Low Oil Prices

The news from the IEA is not good.

“World oil demand growth appears to have peaked in 1Q15 at 1.8 mb/d and will continue to ease throughout the rest of this year and into next as temporary support fades.”

I don’t have great faith in forecasts but the data shows declining demand growth from late 2010 to the 2nd quarter of this year (Figure 1).

Figure 1. Year-over-year demand growth, 2010-2015. Source: IEA and Labyrinth Consulting Services, Inc.

(click image to enlarge)

The weak global economy is the cause of low demand growth. The current debt crisis Greece and collapsing stock markets in China are the latest alarm signals. Related: OPEC Still Holds All The Cards In Oil Price Game

Today, the IMF lowered its world economic growth outlook because of these problems.

“We have entered a period of low growth.”
—IMF chief economist Olivier Blanchard

IEA data shows that world liquids production increased 1.1 mmbpd compared with the 1st quarter of 2015, and demand fell by 410 kbpd (Figure 2). Half of the production increase occurred in June 2015.

Figure 2. IEA quarterly liquids supply and demand.Source: IEA and Labyrinth Consulting Services, Inc.

(click image to enlarge) Related: Top 5 Oil Producing Countries Could See Production Peak This Year

The production surplus (supply minus demand) that is responsible for low oil prices continues to increase (Figure 3).

Figure 3. World liquids production surplus or deficit. Source: IEA and Labyrinth Consulting Services, Inc.

(click image to enlarge)

The Brent crude oil price has fallen from $65 in late June to approximately $58 today. Related: Oil Imports Have Energy Poor Greece In A Stranglehold

Current events in Greece and China, and a possible deal with Iran occur against the backdrop of a growing world oil-production surplus. This surplus consists of two components: over-production and weakening demand growth. Of the two, over-production is the easier problem to solve.

Unconventional production has not declined meaningfully so far and OPEC seems determined to maintain or increase its production. The standoff will be resolved by lower prices. Clearly, the few months of lower oil prices in late 2014 and early 2015 were insufficient to force unconventional production lower. A longer period of much lower prices may be needed.

By Art Berman for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • lenb on July 13 2015 said:
    Arthur I dont understand why one believe anything the oil less french based IEA has to say given their proven historical bias.....from Comerstone Analytics this AM that i have repeatedly ask you to investigate.....

    Missing oil (some 500MB) implies the IEA/consensus has simply understated global demand and will eventually revise up their demand numbers to Mike’s figure, as we’ve seen numerous times before. Consequently, oil demand is currently MUCH higher than generally perceived, as also evidenced by US demand gains, and is not currently being discounted in oil prices.
  • lenb on July 13 2015 said:
    We had a “missing oil” issue in both 2012 and 2013, as you may recall, and the end result was the eventual upward revision (done in piecemeal) of consensus figures by close to a million b/d for each year.----proof of the IEA corruption of the past.
  • Rushabh Shah on July 16 2015 said:
    Ask yourself this question. Why would rail shipments of petroleum products be falling every week if the EIA numbers were even remotely close to being correct?

    https://www.aar.org/Pages/Freight-Rail-Traffic-Data.aspx#weeklyrailtraffic

Leave a comment




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