OPEC Still Holds All The Cards In Oil Price Game
Traders were busy throwing in the towel on oil futures this week just as the first solid data and hope appeared that oil prices may be starting on the long road to recovery.
As oil prices approached $52 per barrel on Tuesday, July 7, the EIA released the July Short-term Energy Outlook (STEO) that showed an increase in global demand.
Figure 1. New York Mercantile Exchange crude oil futures, Continuous Contract #1 (CL1) (Front Month).
Source: Quandl
(Click image to enlarge)
Global liquids demand increased 1.26 mmbpd (million barrels per day) compared to May (Figure 2).
Figure 2. World Liquids Supply and Demand, July 2013-June, 2015.
Source: EIA and Labyrinth Consulting Services, Inc.
(Click image to enlarge)
This is the first data to support a potential recovery in oil prices. For months, great attention was focused on soft measures like rig count, crude oil inventories and vehicle miles traveled, all in the United States. These are potential indicators of future demand but hardly the kind of data that should have moved international oil prices from $47 in January to $64 in May.
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The relative production surplus (production minus consumption) moved down to 1.9 mmbpd (Figure 3).
Figure 3. World liquids production surplus or deficit (total production minus consumption)
and Brent crude oil price in 2015 dollars. Source: EIA and Labyrinth Consulting Services, Inc.
(Click image to enlarge)
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