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An observation worth noting … and pondering, from Mark Lewis (links in original):
Oil market commentators increasingly dismiss the very idea of supply-side constraints on the oil market, pointing to the recent surge in light-tight oil production from US shale deposits and the existence of vast shale formations elsewhere in the world….
But does this peak demand theory bear scrutiny?
[F]rom data for 2013 released by the EIA recently, it is now clear that US demand not only increased last year, but accelerated rapidly over the course of the year.
All of [the data reported by the author] implies that the reduction in US oil demand over 2008-12 was not so much structural as due mainly to the weakness of the US economy following the global financial crisis, and the tightness of the local oil market until recently. As the economy has started to recover and rising domestic supply has made local prices more affordable, US consumers – whose ranks have swollen by 14m since 2007 – have started coming back to market.
Against this backdrop, the peak-demand narrative looks deficient at best and a distraction at worst….
“Peak demand” [see my six-part October & November 2013 series on this topic beginning here] has served as a convenient argument by those who continue to profess that we have no energy supply concerns worth discussing, much less planning for. But as with too many of these convenient and dismissive arguments light on facts and context, the reality suggests otherwise.
That those who should and do know better continue to ignore the inconvenient portions of the true narrative is a concern now, and will be an even larger one in the future. As populations rise; as domestic demands by oil exporting nations likewise increase; as prices continue to remain high in order to both justify and permit exploration and production of unconventional reserves, and as production rates from both conventional crude and tight oil formations continue to decline (the latter more rapidly than the former), these additional facts suggest that a broader and more truthful perspective about future energy supplies needs to be injected into the conversations.
Consumers unaware of the realities about current and future production options must be respected enough to be told the truth and not just the carefully-massaged version which supports a limited group benefitting from the silence. So too must elected officials at all levels of government understand that same broader picture of what’s in store for all of us.
Planning for anything with the full array of facts is usually a better approach in any setting. With an issue of this magnitude, it’s actually the only option—even if that limited group now benefitting from the silence is impacted in order to benefit everyone else.
Should that really be such a difficult choice?
~ My Photo: after the storm at Good Harbor Beach, MA – 10.25.05
LONDON, Feb 13 (Reuters) – Stronger-than-expected demand has drained oil inventories to the lowest level since 2008, tightening the market and defying predictions of a glut, the West’s energy watchdog said on Thursday.
The International Energy Agency (IEA) said oil inventories in the developed world plummeted by 1.5 million barrels per day (bpd) in the last three months of 2013, the steepest quarterly decline since 1999.
The IEA, which advises most of the largest energy-consuming countries on energy policy, becomes the third major forecaster this week to predict higher oil use as economic growth picks up in Europe and the United States.
“Far from drowning in oil, markets have had to dig deeply into inventories to meet unexpectedly strong demand,” the IEA said in its monthly oil market report.
The IEA raised its forecast for global oil demand growth this year by 50,000 bpd to 1.3 million bpd.
That was boosted by a rebound in demand in North America and Europe after several years of declining consumption.
The Paris-based agency increased its estimate of the demand for oil from the Organization of the Petroleum Exporting Countries (OPEC) from last month’s report by 100,000 bpd to 29.6 million bpd .
“Demand has been stronger than expected, and we’re operating with low stock levels right now, which has been supportive for prices,” Antoine Halff, head of the IEA’s oil industry and markets division, told Reuters.
“Demand for OPEC crude looks stronger.”
Both OPEC and the U.S. Energy Information Administration raised their forecasts for 2014 demand in monthly reports this week.
Growing oil production in North America had led some to predict international crude prices would fall in 2014, after averaging around $110 a barrel in each of the past three years.
But robust demand and supply problems in a number of OPEC countries have kept prices supported, the IEA said.
While output from Libya recovered in January to 500,000 bpd, Iraqi output fell by 140,000 bpd to 2.99 million bpd, the IEA said, and warned that exports from Libya were likely to continue to be constrained by political unrest in the country.
Output in Saudi Arabia, OPEC’s largest producer, fell by 60,000 bpd in January to 9.76 million bpd, the IEA said.
Halff said demand for OPEC crude oil could be even stronger in the coming months as companies moved to rebuild oil inventories to a more comfortable level.
The IEA kept its estimate for supply growth from countries outside of OPEC unchanged from last month, forecasting an increase of 1.7 million bpd this year.
“We’re going into a period of lower demand as refineries start maintenance after the winter,” Halff said.
“We need to rebuild stocks.”
Benchmark Brent crude oil prices were down about 0.5 percent on Thursday at $108.24 a barrel, slipping after hitting a month-high of $109.75 at the start of the week.
(Reporting by Christopher Johnson and David Sheppard; editing by Jason Neely)