Energy Prospectus

https://www.platts.com/latest-news/oil/ ... 26a5f5dc8c

OPEC to overshoot? S&P
Global Platts estimates that global oil inventories are mostly drained down to average levels, a conclusion echoed recently by a report from Goldman Sachs. Data is murky and is often published on a several-month lag, which could add to the danger that OPEC tightens the market too much. Head of S&P Global Platts Analytics, Chris Midgley, said that the seasonal dip in demand could mean that oil prices do not spike until the second half of the year.

EIA estimates of shale growth “extremely optimistic.”
A new report from the Post Carbon Institute analyzed thousands of shale wells and concluded that the EIA’s assumptions about the long-term production potential of U.S. shale are “highly to extremely optimistic, and are therefore very unlikely to be realized.” The report said that depletion will force shale drillers outside of core areas, and even there, it will be difficult to keep production elevated for the next several decades, as the EIA assumes.

Goldman Sachs drew an even more bullish conclusion, saying in a note to clients Thursday (February 1) that "the rebalancing of the oil market has likely been achieved, six months sooner than we expected." The investment bank revised up its forecast for demand growth in 2018 and forecast that oil prices could rise to $82.50/b by mid-year.

Demand for oil is seasonal. Q1 is the lowest demand for the year. Demand spikes mid-Q2 as refiners must ramp up production of summer blend gasoline, which requires more crude oil than winter blends of gasoline. Demand for diesel and jet fuel also increases in the summer.

When you see the EIA weekly storage report on Wednesday remember that this is the time of year the crude oil inventories in the U.S. must build so that we have enough raw material to keep up with the annual surge in demand for transportation fuels. It happen each year in May.