EIA STEO report
The EIA (U.S. Energy Information Administration) released its STEO (Short-Term Energy Outlook) report on March 8, 2016. It reported that the global crude oil supply-demand gap will be ~0.7 MMbpd (million barrels per day) in 2017. Previously, in its February STEO report, it estimated that the global crude oil supply-demand gap would be ~0.29 MMbpd in 2017. Growing global supplies would have a negative impact on crude oil prices. However, the IEA (International Energy Agency) estimates that the global crude oil supply-demand gap will be around zero by the end of 2017.
Crude oil price estimates
A Reuters poll suggests that Brent prices will average around $40 per barrel in 2016. On the other hand, the National Bank of Abu Dhabi suggests that crude oil prices could test $20 per barrel in the short term due to fragile economic conditions in the Middle East and North Africa region. Read How Are Oil Prices Squeezing OPEC Members’ Budgets? to learn more. Moody’s suggests that crude oil prices could hit $25 per barrel if Iran increases production.
In its February STEO report, the EIA estimated that Brent crude oil prices could average around $38 per barrel in 2016 and $50 per barrel in 2017. WTI (West Texas Intermediate) oil prices were estimated to average at $38 per barrel in 2016 and $50 per barrel in 2017. However, in its March STEO report, the EIA expected West Texas Intermediate and Brent crude oil prices to average ~$34 per barrel in 2016 and ~$40 per barrel in 2017. The downward revisions in the oil prices suggest more pain for the crude oil market.
Low crude oil prices have a negative impact on oil and gas producers’ margins like Apache (APA), QEP Resources (QEP), Synergy Resources (SYRG), WPX Energy (WPX), and Hess (HES). The volatility in the oil prices impacts ETFs and ETNs like the iShares U.S. Energy ETF (IYE), the iShares U.S. Oil Equipment & Services ETF (IEZ), and the VelocityShares 3x Long Crude Oil ETN (UWTI).