Will Crude Oil’s Supply and Demand Balance Narrow or Widen?



Supply and demand balance

Russian energy minister Alexander Novak stated that the supply and demand balance was at 1.5 MMbpd (million barrels per day) in the current crude oil market.

The IEA (International Energy Agency) estimates that the crude oil supply and demand gap could diminish in 2016. The IEA thinks that the balance could fall to 200,000 bpd (barrels per day) in 2H16 compared to 1.5 MMbpd in 1H16.

Slowing non-OPEC (Organization of the Petroleum Exporting Countries) production could help to rebalance the global oil market. For more on non-OPEC production, you can read Non-OPEC Crude Oil Production Impacts Crude Oil Prices.

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EIA’s Short-Term Energy Outlook

In a recent Short-Term Energy Outlook Report, the EIA (U.S. Energy Information Administration) estimated that the global crude oil supply and demand gap averaged 1.2 MMbpd in 1H16.

The global crude oil supply and demand gap is expected to fall to 0.8 MMbpd in 2H16. In 1H17, the gap is expected to average 0.52 MMbpd and to fall further to 0.10 MMbpd by 2H17.

Impact on energy companies and ETFs

The narrowing supply and demand gap could benefit crude oil prices. High crude oil prices benefit domestic and international oil producers such as PetroChina (PTR), Comstock Resources (CRK), Warren Resources (WRES), and Northern Oil & Gas (NOG).

They also influence ETFs such as the PowerShares DWA Energy Momentum ETF (PXI), the Direxion Daily Energy Bear 3x ETF (ERY), and the Guggenheim S&P 500 Equal Weight Energy ETF (RYE).

In the next part of this series, we’ll look at the latest crude oil price forecast.


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