1 Yr Ago Crude Oil Began Its Slide, More Trouble Ahead
$OIL, $USO, $BP
A year ago on of the biggest Crude Oil price decline began, and push behind the slide is still on because there is simply to much supply of Black Gold for the market to store and absorb.
World output continues to grow, as the economic outlook begins to slow.
Organization of the Petroleum Exporting Countries (OPEC) and the possibility of a return of Iranian Crude Oil exports augurs more price pressure ahead.
Crude Oil prices began a 7-month rout this time last year that pushed Brent Crude Oil futures from 116 to around 43 in January.
Prices have retraced a percentage of the decline, and there are signs that OPEC’s strategy of keeping output high in a bid to drive out competitors expensive tight Oil and deep water production, is beginning to change market fundamentals.
The Bearish fundamental change is OPEC production that has risen from 29.79-M BPD last year to over 31-M BPD now.
USEnergy Information Administration (EIA) data published this month shows that global petroleum oversupply, or production Vs consumption, has more than doubled to 2.6-M BPD since the end of Q-2 of Y 2014.
And expect more Crude Oil to come to market.
Should Iranian Crude Oil return before the end of the year, traders said that would prevent a seasonal draw down in stocks that usually happens in Q-2, preventing a re-balancing of the market.
China’s Crude Oil imports have held near record highs for over 6 months as its gasoline demand is rising on a surge of new cars and the government built up its strategic reserves.
And while some analysts believe China’s demand will remain strong, there are signs that its thirst for Crude Oil is slowing as the world’s 2nd-biggest economy grows at the slowest pace in decades.
The global economic outlook has dimmed, with the World Bank (WB) cutting its Y 2015 outlook from 3 to 2.8%, urging countries to “fasten their seat belts”.
Driven by lower prices, many analysts expected production, especially of price sensitive US shale drillers, to fall. At the same time, OPEC is producing near record levels and top exporter Saudi Arabia has indicated it could increase output further.
The EIA expects oversupply to last at least until Y 2017, but others say that the glut could be more permanent as Crude Oil loses its share in the world’s energy consumption.
BP, plc (NYSE:BP) said in its annual outlook this month that last year may be seen as a turning point for the hydrocarbon energy industry.
“In years to come, it is possible that 2014 may come to be seen as something of a watershed for the energy industry…. The big picture remains one of abundant reserves, with new sources of energy being discovered more quickly than they are consumed,” the report said.
Stay tuned…
HeffX-LTN
Paul Ebeling
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