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Global Oil Shortage Before Year’s End? Surely Not…
Global Oil Shortage Before Year’s End? Surely Not…
Now that OPEC has left its production quota unchanged, the world will continue to see a glut in supplies, right?
Some analysts aren’t so sure. Sanford C. Bernstein predicts that by the end of the year global demand will outstrip supply by an estimated 1.5 million barrels per day.
That flies in the face of a lot of separate estimates. The IEA says that oil supplies are still in excess of what the world is consuming, by some 2 million barrels per day. Even with flat supplies coming from US shale, drillers are still pumping way more oil than the world is consuming. That leaves Bernstein as an outlier when it comes to guessing which way oil markets are heading.
But there is reason to believe that Bernstein is not off the mark. While market analysts are right to closely watch the trajectory of US production levels as well as what OPEC is up to, a lot less attention is being paid to the demand side of the equation. Part of OPEC’s strategy, we must remember, is to ensure the world stays hooked on oil for the long haul. The cartel’s strategy of keeping prices low dovetails with that – low prices reduce the urgency to transition away from crude oil.
Related: Price Manipulation In The Oil Markets?
And their strategy is bearing fruit – demand is growing quickly. The IEA said in its May report that “global demand growth gained momentum in recent months.” That is certainly true in the US, where motorists are hitting the roads at levels not seen since before the financial crisis. Seduced by lower prices, gasoline consumption is at its highest level since 2007, after years of stagnation. Low gas prices are also giving a boost to SUV sales as drivers cast off their energy efficient ways at the first sign of weak prices.
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CEO Of Rosneft Compares Oil Market Manipulation Which “Doesn’t Reflect Reality” To Gold Price Rigging
CEO Of Rosneft Compares Oil Market Manipulation Which “Doesn’t Reflect Reality” To Gold Price Rigging
It was a little under two years ago when, when oil and gas prices were both surging, Obama decided to punish the evil speculators whose fault the rise of oil was when he announced he would “give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position. The administration officials said such authority could help limit disruptions in energy markets.” Needless to say, Obama did not punish the world’s central banks for flooding the globe with excess liquidity, which by definition would end up in less than “productive” ventures such as barrels of oil.
Over the weekend, it was the opposite, when instead of blaming speculators for soaring prices, none other than the CEO of Russia’s largest publicly-traded oil company, Rosneft, in not so many words, accused speculators of sending the price of oil plunging. Which is actually a narrow read of what he said, and one we don’t agree with.
What we most certainly do agree with, is his broader message, namely that financial speculation has made a mockery of physical supply and demand and “distorted oil markets, prices do not reflect reality. They are driven instead by financial speculation, which outweighs the real-life factors of supply and demand. Financial markets tend to produce economic bubbles, and those bubbles tend to burst. Remember the dotcom bust and the subprime mortgage crisis? Furthermore, they are prone to manipulation. We have not forgotten the rigging of the Libor interest rate benchmark and the gold price.”
Yes indeed, the CEO of an oil major just used gold rigging as an example of the same commodity manipulation that gold longs have been complaining about for years if not decades.
Here is Igor Sechin full Op-Ed in the FT:
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