EIA Forecasts Crude Oil Supply and Demand Balance by 2H17
Crude oil prices
November West Texas Intermediate crude oil futures contracts rose 1.1% and were trading at $50.9 per barrel in electronic trading at 5:35 AM EST on October 14. For more on crude oil prices, read Part 1 of this series.
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Crude oil supply and demand balance
Market surveys project that the current global crude oil supply outstrips demand by 1 MMbpd (million barrels per day) to 1.5 MMbpd.
The EIA (U.S. Energy Information Administration) released its monthly “Short-Term Energy Outlook” (or STEO) report on October 13. It reported that crude oil supply could outstrip demand by 1.2 MMbpd (million barrels per day) in 2H16 compared to 1.6 MMbpd in 1H16. It expects that crude oil supply and demand will reach a balance in 2H17.
OPEC (Organization of Petroleum Exporting Counties) released its “Monthly Oil Market Report” on October 12. It reported that non-OPEC supply is expected to rise by 0.24 MMbpd to 56.4 MMbpd in 2017. For more, read OPEC’s Monthly Oil Market Report Is Negative for Oil Prices.
The IEA (International Energy Agency), in its monthly report, estimated that crude oil oversupply will persist until 1H17. For more, read IEA’s Monthly Oil Market Report Is Bearish for Crude Oil Prices.
The possibility of increasing crude oil supplies from Iran, Nigeria, and Libya could add to the oversupplied crude oil market. Read Iran, Nigeria, and Libya Could Undo OPEC’s Historic Deal, Analyzing Russia’s Crude Oil Production, and Iran’s Crude Oil Production Could Impact the Crude Oil Marke for more on the oversupply situation in the oil market.
Changes in demand and supply estimates can cause volatility in crude oil prices. Volatility in crude oil prices impacts the profitability of oil producers like SM Energy (SM) and Goodrich Petroleum (GDP).
Volatility also impacts funds such as the VelocityShares 3x Inverse Crude Oil ETN (DWTI), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the PowerShares DWA Energy Momentum ETF (PXI), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), and the ProShares Ultra Bloomberg Crude Oil ETF (UCO).
In the next part of this series, we’ll look at US crude oil inventories.