Bloomberg reported that we are going to get a balanced market by 2017 where production will match consumption and this is thanks to turmoil in oil producing nations as opposed to actual cut in production.
World oil production in 2017 will very nearly match consumption, ending several years of oversupply, the Paris-based IEA forecast on June 14. For that to happen, the Organization of Petroleum Exporting Countries would have to pump an extra 650,000 barrels a day over the year, according to Bloomberg calculations based on IEA data. That would require solutions to militant attacks in Nigeria, deep political divisions in Libya or an economic crisis in Venezuela.
I find it questionable that we actually have to resort to depending on terrorists. civil wars, and economic crisis to get to this stage, but at least oil prices will get to reach above USD60, hopefully before the end of the year, or at least early next year, which is the point analysts said it would be commercially viable to revitalise exploratory and other upstream activities.
And before everyone gets all excited and started ramping up on production, Goldman Sachs stated in a report that according to them “The recent rebound in oil prices is fragile” because
Crude production in Canada and Nigeria has fallen off, but beyond the disruptions that have pushed oil prices up in recent weeks, the market still hasn’t worked through much of its surplus, the bank said in the report.
The Organization of Petroleum Exporting Countries is putting out more oil than expected and climbing energy prices could spur a supply response by the United States and other producers, which could put pressure on the market.
Though U.S. crude stockpiles are declining – the Energy Department reported another drop of 900,000 barrels Wednesday – it may not mean crude supplies are shrinking enough to meet current demand.
“We believe that this shift in visible stocks reflects the strong pull from China over the past few months and not a tighter market,” Goldman analysts wrote.
China has been importing more crude after its demand fell this year. Goldman said it expects that commercial inventories will “start to reflect our view that the global market is not yet in deficit.”
In January, Reuters reported about China building underground caverns to expand the capacity of their strategic petroleum reserves and taking advantage of the cheap oil prices. To put it bluntly, China is stockpiling.
As such, even though US crude stockpiles are declining, China’s are increasing, OPEC still producing more oil than ever, which means nothing has changed much for the market.