Oil Price 'Risk Premium' to Play Out Over 4Q17

Robert Boslego - INO.com Contributor - Energies

The Energy Information Administration (EIA), International Energy Agency (IEA) and Organization of Petroleum Exporting Countries (OPEC) each released their monthly global oil assessments and projections. They agree that the global oil glut will not be whittled down to anywhere near OPEC’s target of the 5-year OECD average by year-end. Their numbers also imply that global inventories in 1Q18 will build.

The EIA numbers indicate that stocks will be 130 million above the average, just slightly below September’s estimate at end-March.

Global Oil Inventory

OPEC does not project its own production, and it, therefore, does not produce future global inventory levels. But assuming September OPEC production for 4Q17 and 1Q18, stocks will drop by 51 million barrels in 4Q17 and rise by 74 million in 1Q18, a net gain in inventories from September. Continue reading "Oil Price 'Risk Premium' to Play Out Over 4Q17"

Why Oil Is At $50 With An Inventory Glut

Robert Boslego - INO.com Contributor - Energies

According to the Energy Information Administration (EIA), world oil inventories are about 425 million barrels higher than their “normal” levels. In the U.S., inventories stand a 1.368 billion barrels, a few million off their recent peak. Given that supply glut, how could oil futures prices be at $50 after falling below $30?

U.S. Crude and Product Stocks

One answer is that the futures market assesses future developments. As discussed below, the peak of the glut appears behind us and the U.S. oil market is tightening, as rising demand narrows the supply-demand gap. This is best observed by looking at the trends in inventory storage changes for both petroleum products and crude oil. Continue reading "Why Oil Is At $50 With An Inventory Glut"