EIA raises demand growth to 1m, cuts supply growth to 700K

[dan_s]

IMO this is just the start. I believe demand growth in 2015 will be AT LEAST 1.5 million bbls per day. Abundant supply + low prices will increase demand for refined products.
I also believe that North American production will peak in 2015 and be on decline by year-end. I think the active rig count will drop by 50 rigs per week until we get down to 1,000 onshore rigs. That is not enough to maintain the current production from the sale wells. Keep in mind that a high percentage of the wells drilled in the last five years (tens of thousands of them) are on steep decline. All of the horizontal wells completed in 2014 will be producing at less than half their initial production within twelve months. Since all of the production growth in the last few years came from the U.S. shale plays, growth will slow down very fast. Unless oil prices go back up, the world's oil supply could be on decline by early 2016.

[dan_s]

"EIA forecasts that Brent crude oil prices will average $58/bbl in 2015 and $75/bbl in 2016, with annual average West Texas Intermediate (WTI) prices expected to be $3/bbl to $4/bbl below Brent. The current values of futures and options contracts suggest very high uncertainty in the price outlook. WTI futures contracts for April 2015 delivery, traded during the five-day period ending January 8, averaged $51/bbl, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in April 2015 at $34/bbl and $76/bbl, respectively. The 95% confidence interval for market expectations widens considerably over time, with lower and upper limits of $28 and $112 for prices in December 2015."

NOTE that EIA expects U.S. production to be up only 0.1 million bbls per day in 2015: "Total U.S. crude oil production averaged an estimated 9.2 million barrels per day (bbl/d) in December. Forecast total crude oil production averages 9.3 million bbl/d in 2015."

What I expect to happen is that U.S. production will be up in Q1 as operators complete existing inventory of wells drilled in Q4. Then it will be flat in Q2 and be on decline by Q3.

[dan_s]

BTW it will not be difficult for the traders to figure this our after all of the companies announce big cuts to capex and their production guidance for 2015. Most of the companies I follow just HOPE to maintain production at Q4 levels during 2015.