Tag Archives: #OilShortage

Oil Shortage, Price Spike Predicted

Oil Price Spike Predicted

Introduction — Rising Canadian and U.S. production will not be enough to make up for tepid global investment, leading to a supply shortage in oil markets in a few years, a International Energy Admisitration report published last Monday said.

In its annual five-year forecast released in Houston Monday, energy watchdog Paris-based International Energy Agency said “it is far from clear that enough projects will enter the pipeline in the next few years to avoid a potentially tight market by 2020 and with it, the possibility of a price spike.”

The report comes as major oil and gas producers continue to slash their exploration budgets amid lower oil prices. Years of sharply growing oil supply have put the market into a state of oversupply in recent years, depressing prices. That led to widespread retrenchment on the part of debt-laden major oil producers. Late in 2016, OPEC and its non-OPEC allies agreed to curb supplies in an attempt to put oil markets closer into balance.

In Summary…$25 trillion investment in new oil-producing capacity over the next 25 years needed to meet the growing demand as reported here in this newsletter.

Source: “IEA predicts oil supply shortage and price spike within three years,” Financial Post, Jesse Snyder, 6 Mar 2017; “$25 Trillion Investment Needed, Oil And Gas Insider, Bill Moist, 22 Jan 2017

Coming Oil Shortage In 2017?

Oil shortage…Global oil markets will swing from surplus to deficit in the first half of 2017 as OPEC and other producers follow through on an agreement to cut supply, according to the International Energy Agency.

Oil stockpiles will decline by about 600,000 barrels a day in the next six months as curbs by OPEC and its partners take effect, said the agency, which had previously assumed inventories wouldn’t drop until the end of 2017. Russia, the biggest producer outside OPEC to join the deal, will gradually implement the full reduction it promised, according to the IEA.

Oil has gained about 17 percent since the Organization of Petroleum Exporting Countries agreed on Nov. 30 to trim output for the first time in eight years, an accord expanded on Dec. 10 with the participation of 11 non-members including Russia and Kazakhstan.

“Before the agreement among producers, our demand and supply numbers suggested that the market would re-balance by the end of 2017,” the Paris-based agency said in its monthly market report. “If OPEC promptly and fully sticks to its production target” and other producers cut as agreed, “the market is likely to move into deficit in the first half of 2017.”

Stockpile declines…The stockpile declines will only occur if OPEC reduces supply enough to meet and maintain a target of about 32.7 million barrels a day, the agency said. The organization pumped a record 34.2 million a day in November, making the cut required to reach its target even bigger, according to the IEA, which advises 29 nations on energy policy.

In summary…There are some signs the market is already starting to tighten. While inventories of crude and refined oil in industrialized nations remain 300 million barrels above their five-year average, they dropped for a third month in October, the longest run of declines since 2011, according to the IEA.

Source: Grant Smith, OPEC Deal To Create Oil-Supply Deficit Next Half, IEA Says, Bloomberg, 13 December 2016; Jeremiah Carver, From oil glut to oil deficit in 2017, Oilpro.com, 13, December 2016