Oil Price - May 26
Posted: Thu May 26, 2016 9:47 am
"This year, OPEC’s spare pumping capacity—the amount it can bring online within 30 days and sustain for at least 90—will be at its lowest level since 2008, the U.S. Energy Information Administration estimates. It said OPEC spare capacity will decline more than 22% in the current quarter compared with the previous quarter." - Wall Street Journal
Within a few months, demand for oil will exceed global production. Yes, there is a lot of oil in storage to soften the impact. However, Non-OPEC production (60% of global supply) is on steady decline and there is not much chance of the decline slowing. I am expecting the words "glut" and "awash in oil" to be replaced by "shortage" and "crisis" within a year. - Dan
Rest of WSJ article below:
By the third quarter of this year, the EIA said OPEC spare capacity will fall to 1.25 million barrels a day—a level not seen since 2008, when oil prices peaked at $147 a barrel on tight supply and surging Chinese demand.
The cartel’s ability to boost output rests mainly with its biggest producer, Saudi Arabia, which has historically held nearly all of the group’s spare capacity. Since oil prices began falling in 2014, the Saudi state oil company has cut investments in new production. New production it brought onstream has mostly offset natural declines in other fields, rather than adding much new capacity.
Saudi officials have long said they can boost production by about 2 million barrels a day over today’s record daily production of 10.2 million barrels. But that 2 million barrels might not be possible in short order, a Saudi oil industry official said.
“If there was a big crisis tomorrow, then the maximum Saudi Arabia can do would be around 500,000, maybe 700,000 maximum,” the official said.
Within a few months, demand for oil will exceed global production. Yes, there is a lot of oil in storage to soften the impact. However, Non-OPEC production (60% of global supply) is on steady decline and there is not much chance of the decline slowing. I am expecting the words "glut" and "awash in oil" to be replaced by "shortage" and "crisis" within a year. - Dan
Rest of WSJ article below:
By the third quarter of this year, the EIA said OPEC spare capacity will fall to 1.25 million barrels a day—a level not seen since 2008, when oil prices peaked at $147 a barrel on tight supply and surging Chinese demand.
The cartel’s ability to boost output rests mainly with its biggest producer, Saudi Arabia, which has historically held nearly all of the group’s spare capacity. Since oil prices began falling in 2014, the Saudi state oil company has cut investments in new production. New production it brought onstream has mostly offset natural declines in other fields, rather than adding much new capacity.
Saudi officials have long said they can boost production by about 2 million barrels a day over today’s record daily production of 10.2 million barrels. But that 2 million barrels might not be possible in short order, a Saudi oil industry official said.
“If there was a big crisis tomorrow, then the maximum Saudi Arabia can do would be around 500,000, maybe 700,000 maximum,” the official said.