World Oil Supply, Demand And Price Outlook, January 2019

The Energy Information Administration released its Short-Term Energy Outlook for January, and it shows that OECD oil inventories likely bottomed last June at 2.806 billion barrels. It estimated an 8 barrel gain for December to 2.883 billion, 39 million barrels higher than a year ago.

Throughout 2019, OECD inventories are generally expected to rise. At year-end, EIA projects ending the year with 2.951 million barrels, 68 million more than at the end of 2018.

EIA also extended its outlook through 2020 for the first time. It projects that stocks will build another 75 million barrels to end the year at 3.025 billion. That would push stocks into glut territory.

Short-Term Energy Outlook

Oil Price Implications

I performed a simple linear regression between OECD oil inventories and WTI crude oil prices for the period 2008 through 2017. As expected, there are periods where the price deviates greatly from the regression model. But overall, the model provides a reasonably high r-square result of 79 percent. Continue reading "World Oil Supply, Demand And Price Outlook, January 2019"

World Oil Supply, Demand And Price Outlook, December 2018

The Energy Information Administration released its Short-Term Energy Outlook for December, and it shows that OECD oil inventories likely bottomed in March at 2.807 billion barrels. It estimated a 10-million barrel gain for November to 2.902 billion. Though it forecasts that stocks will drop in December to 2.894 billion, that is 50 million barrels higher than a year ago.

Throughout 2019, OECD inventories are generally expected to rise, reaching 3.010 billion barrels in November. Its projections end the year with 88 million barrels more than at the end of 2018, glut territory.

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OPEC pledged to cut its production by 800,000 b/d from the October level for the first six months of 2019. EIA estimates OPEC production at 32.9 million barrels per day (mmbd), including Qatar, which will no longer be a member of OPEC in January. EIA’s assume OPEC production for 2019 is 31.8 mmbd, and so that represents a larger 1.1 mmbd drop. Continue reading "World Oil Supply, Demand And Price Outlook, December 2018"

How Saudi Arabia Will Manage the Oil Market in 2017

Robert Boslego - INO.com Contributor - Energies


OPEC agreed in Algeria to limit future oil production. This represents a major shift in the policy announced in November 2014 to compete for market share through lower prices.

The OPEC communique stated the group will retain output to a "target range of 32.5 to 33.0 million barrels per day" (mmbd). In the latest OPEC Monthly Oil Market Report (MOMR), OPEC reported that production average 33.4 mmbd in September. While that is not far above the target range, there are other problems looming on the horizon; several countries—Nigeria, Iran, Iraq, and Libya—all want to restore their output to levels they were at before their supplies were disrupted, and that could push OPEC’s output up to nearly 35 mmbd if they succeed.

Saudi Energy Minister Khalid Al-Falih reversed KSA’s position from last April when it would not freeze output without Iran’s agreement to do the same. Instead, he said, Iran, Nigeria and Libya would be allowed to produce "at maximum levels that make sense as part of any output limits which could be set as early as the next OPEC meeting in November."

My interpretation is that Saudi Arabia and the smaller Gulf producers are therefore going to have to absorb the cuts if they intend to achieve the target. Continue reading "How Saudi Arabia Will Manage the Oil Market in 2017"

3 ETF's To Buy If You Think Oil Will Continue To Rise Following OPEC's Decision

Matt Thalman - INO.com Contributor - ETFs


Last week the Organization of the Petroleum Exporting Countries or OPEC announced that the group had to come an "agreement" to reduce oil production. The new deal slated to cut production from an estimated 33.2 million barrels per day down to 32.5 million barrels per day.

While some Wall Street analysts don't believe the production reduction will actually happen, the fact remains that since OPEC made the announcement, the price of oil is up rather dramatically. Prior to the announcement oil was trading around the $44.50 range and has since jumped to the $50 range.

Many investors are looking at the price of oil and wondering how they can get a piece of this action. Let's take a look at three Exchange Traded Funds you can buy if you believe oil prices will continue to increase. Continue reading "3 ETF's To Buy If You Think Oil Will Continue To Rise Following OPEC's Decision"

OPEC's Algiers Meeting

Robert Boslego - INO.com Contributor - Energies


If you are having trouble keeping up with all of the rhetoric in the oil market over the past two months, you are not alone. That’s the oil producers’ basic idea, create as much uncertainty as possible in a bid to scare traders from shorting oil, thereby preventing oil prices from cratering.

Lead-Up to Algiers

Oil prices bottomed in mid-February, following the slide that had begun in June 2014. The trigger was a meeting between energy ministers from Saudi Arabia and Russia, along with a couple of smaller OPEC Gulf producers. They could not agree to a production cut, so they came up with a “freeze” proposal, whereby producers would agree not to increase production further.

Although this would not take one barrel of production out of the market, it was enough to spook traders who had large short positions to cover (buy). Random statements by producers created price spikes, and the resulting “headline risk” cause short sellers to progressively cover more and more positions. The effect was a sizable price rise. Continue reading "OPEC's Algiers Meeting"