Oil Price - Sept 28

[dan_s]

Preliminary inventory data on Tuesday from the American Petroleum Institute, a trade group, showed crude stocks declined 752,000 barrels in the week to Sept. 23, versus a 2.8 million-barrel build forecast by analysts polled by Reuters. The U.S. Energy Information Administration will release official stockpiles data at 10:30 a.m. EDT.

I'm at a conference in Calgary. I will be one of four energy sector "experts" on a panel at noon CMT. I was told last night that the first question will be directed to me: Where do you see oil prices heading by year-end?

My answer: It depends.
> If OPEC appears to be on a clear path to an agreement to hold production at reasonable levels, Brent will quickly move over $50/Bbl.
> If U.S. liquids inventories keep falling, which is what I now expect to happen, Brent will move over $50 in October.
> If Both happen, we may see $60 Brent by year-end.

If oil stays below $50 through year-end, the risk of a global oil shortage happening as early as 2018 increases. I think Non-OPEC Non-U.S. production is falling now and the rate of decline will accelerate in 2017. In oil stays under $50 much longer (i.e. six months) we won't see the increase in upstream capex necessary to stabilize supply.

BTW I think EIA has been overstating U.S. production several 100,000 bbls per day. The recent declines in U.S. oil inventories are too big if their production volumes are correct.

[dan_s]

Per EIA: U.S. crude stocks unexpectedly fell in the latest week, official data showed Wednesday.
The EIA said crude stocks fell by 1.882 mn barrels after a fall of 6.2 mn barrels the previous week.
Crude inventories were forecast to rise by 2.995 mn barrels.
Gasoline stocks rose by 2.072 mn barrels after a fall of 3.2 mn barrels the previous week.
Gasoline inventories were forecast to rise by 178,000 barrels.

U.S. crude oil stocks are only ~20% of total OECD inventory, but the EIA's weekly report is the best evidence we have at what's happening to supply/demand.