Non-OPEC unplanned supply disruption
Non-OPEC (Organization of the Petroleum Exporting Countries) unplanned supply disruptions are expected to average around 0.4 MMbpd (million barrels per day) in January 2016. They averaged almost 0.4 MMbpd in 2015. Global unplanned supply disruptions averaged around 2.3 MMbpd in January 2016—compared to 3.2 MMbpd in December 2015. Scaling up production from Iran added to the decline in the global unplanned supply disruption. The slowing unplanned supply will continue to put pressure on crude oil prices. It will add to the global glut market and oil stocks.
Surplus production capacity
Resuming unplanned supply disruptions reduce the threat of surplus production capacity. However, record global inventories of just over 3 billion barrels suggest that surplus production capacity is a minimal threat. However, countries like Saudi Arabia still have huge spare production capacity. This means that we’re in an era of mega oil glut. OPEC’s surplus production capacity averaged around 2 MMbpd between 2012 and 2014. Now, it’s just below 2 MMbpd in early 2016.
Rising oil supplies will add to global oil stocks and support the crude oil storage cost, oil tankers, and oil transporting companies like Teekay Tankers (TNK), DHT Holdings (DHT), Spectra Energy (SE), ONEOK (OKE), and Kinder Morgan (KMI). The United States Oil Fund (USO), the PowerShares DB Oil Fund (DBO), and the iPath S&P GSCI Crude Oil Total Return ETN (OIL) are impacted by the rise and fall in oil prices.
The U.S. Energy Information Administration forecasts that Brent crude oil prices could average $38 per barrel in 2016 and $50 per barrel in 2017. WTI (West Texas Intermediate) oil prices could average $38 per barrel in 2016 and $50 per barrel in 2017. Bloomberg surveys suggest that WTI oil could hit as high as $46 per barrel in 4Q16. The long-term bearish fundamentals will continue to put pressure on the oil prices unless OPEC and non-OPEC ties take a collective initiative for a production cut.