Crude oil prices and world oil consumption between 2005 and 1H08
The following chart shows that high crude oil (UCO) (RYE) (IEZ) (XOP) (USL) prices between 2005 and 1H08 led to the fall in crude oil consumption despite strong economic growth during this period. West Texas Intermediate real crude oil prices averaged $114 per barrel during 1H08. The fall in consumption had a negative impact on crude oil prices. For more on crude oil prices, read Part 1 of this series. For updates on the world oil supply and demand gap in 2017, read the previous part of this series.
World oil consumption and economic growth
Global economic growth impacts world oil consumption and oil prices. Commercial and personal transportation activities require large quantities of oil. Oil is also used in manufacturing processes and for power generation.
Crude oil prices and world oil consumption between 2010 and 2013
The above chart shows that crude oil prices recovered between 2010 and 2013. It supported oil consumption. During this period, global economic growth was also steady. Crude oil prices averaged around $88 per barrel between 2010 and 2013. However, the period of stable oil prices led to an increase in crude oil production from non-OPEC producers countries like the US, Canada, and Mexico. For more on US crude oil production, read Is US Crude Oil Production the Most Important Catalyst? and How US Crude Oil Rig Count Could Affect Crude Oil Prices in 2017.
Crude oil prices and world oil consumption between 2014 and 2016
The rise in crude oil production from non-OPEC producers between 2013 and 2015 led to oversupply in the crude oil market. Crude oil prices collapsed during 2H14 and 2015. Lower crude oil prices supported consumption along with steady economic growth in 2015 and 2016.
Crude oil prices and world oil consumption estimates in 2017
Steady world oil consumption supported by steady global economic growth would support oil prices in 2017. The change in world consumption is expected to average 1.6% in 2017—compared to 1.6% in 2016. Global GDP is expected to average 2.7% in 2017—compared to 2.2% in 2016. For updates on the world oil supply and demand gap in 2017, read the previous part of this series.
Impact on oil prices, stocks, and ETFs
Moves in crude oil prices could influence ETFs and ETNs such as the ProShares UltraShort Bloomberg Crude Oil (SCO), the Energy Select Sector SPDR ETF (XLE), the ProShares Ultra Oil & Gas (DIG), the iShares US Oil Equipment & Services (IEZ), and the SPDR S&P Oil & Gas Equipment & Services ETF (XES).
In the last part of this series, we’ll take a look at some crude oil price forecasts.