MADDOG'S LAIR
  • Blog
  • About
  • Contact

Oil: Demand is just as important as supply 

9/14/2016

Comments

 
​Slowing Oil Demand Might Make a Freeze Deal Moot

​
More below.
I have been discussing the fading world economy, and how it will soon dry up oil demand for more than a year. The oil bulls have been studiously ignoring issue, while continuing to go all in on every whisper of a supply freeze. I would feel for them, but anyone that stupid deserves to be brought up short, as they have been.

"The IEA—which advises oil-consuming countries on their energy policies —blamed “wobbling” Asian oil demand and falling oil consumption in Europe for much of the change. The Paris-based agency downgraded its global oil-demand predictions by about 100,000 barrels a day for this year—although it is growing by 1.3 million barrels a day. It also reduced the forecasts by about 200,000 barrels a day in 2017, with consumption increasing more slowly at 1.2 million barrels a day. […]

The IEA’s closely watched monthly oil-market report marked an abrupt shift for an agency that a month ago said the world’s oil glut had begun disappearing. The Organization of the Petroleum Exporting Countries also surprised the market this week with a report that oil production outside the cartel was proving more resilient than expected."

This is purely economy driven, we have yet to see the self drive cars intrusion into the oil market, or the natural gas intrusion into the US fleet vehicle market. After all, Coke trucks, UPS cars, and other fleets running on natural gas would be cheaper, and less polluting than gasoline. Even with low prices gasoline, it seems likely that some fleets will switch to natural gas as a protective measure against future oil price spikes. 

There is nothing in the world's economy which points to an upwelling in growth, which would amount to a serious change in the demand curve for oil. Further, US shale oil suppliers are beginning to cap more wells awaiting a price increase before pumping more oil. Plus, new finds, and continuous technique improvements have begun to lower the break even price point for many oil fields. All of this means that the US is simply waiting to pump more oil once there is a significant price increase.

All of these factors are likely to press oil prices down. The instability issue has also mostly gone away as a reason for oil price increase. It used to be that instability meant that the oil supply from the unstable region made a negative supply imbalance worse. Today we find that even during periods of instability like war, the oil flows, it is too valuable, and the participants in the war all continue to maximize production.

Expect oil prices to continue to fade. Expect the oil bulls to continue to hyperventilate over every ephemeral supply stricture. Until the world's economy rights itself there will be no other way forward.
Comments
comments powered by Disqus

    Author

    Maddog

      Blog Subscription

    Subscribe to Blog

    Archives

    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016

    Categories

    All
    1000-ways-to-die
    Abortion
    Amazon
    America
    Antisemitism
    Anti-semitism
    Bible
    Blogging
    Blue-model
    Book-links
    Booze
    Bus
    Cancer
    Children
    China
    China-ccp
    China-gdp
    China-ghost-cities
    China-ponzi
    Climate-change
    Coast-guardrescue-swimmer
    Cold-war
    Concealed-carry
    Constitution
    Cool-stuff
    Corruption
    Creative-destruction
    Crime
    Crisis-change
    Dead-guy-vote
    Dead-pool
    Death-of-the-pc
    Declaration-of-independence
    Deflation
    Democrat
    Demographic-decline
    Diet
    Earth-hour
    Ecommerce
    E-commerce
    Economic-change
    Economy
    Education
    End-of-history
    Energy
    Environmentalism
    Epa
    Eric-barker
    Europe
    Executive-outcomes
    F35
    Faith
    Family
    Fascists
    Financial-irresponsibility
    Financial-times
    Firearms
    First-world-problems
    Fitness
    Flight-to-security
    Food
    Fourth-turning
    Free-eye-exam
    French
    Funny
    Gdp
    Gdp-usa-vs-britain
    Gdp-usa-vs-germany
    Gdp-usa-vs-sweden
    Generational-theft
    Global-warming
    Government-incompetence
    Government-we-deserve
    Happiness
    Health
    Helicopter-parent
    Hell
    Holocene
    Honor
    Housing-affordability
    I-love-beaver
    Imf
    Immigration
    Independence-day
    Inefficiency
    Inflation
    Innovation
    Intelligence
    Intergenerational-conflict
    International-relations
    Investing
    Iran
    Iraq-war
    Islamic-reformation
    Italian-travel
    Japan
    Jodie-foster-effect
    Kayaking
    Keynesian-economist
    Kurdistan
    Law
    Leave-nato
    Leave-the-un
    Light-rail
    Maddog-story
    Marine
    Marriage
    Media
    Medical-insurance
    Medicine
    Middle-east
    Military
    Military-waste
    Money
    Monopoly
    Nanny-college
    News
    New-seasons
    Nirvana-is-another-name-for-hell
    North-korea
    Nukes
    Obama-doctrine
    Oil
    Oregon
    Organic
    Parenting
    Partition
    Pearl
    Pensions
    Peter-principle
    Police
    Politicians
    Portland
    Portlandia
    Portland-transit
    Predictions
    President-bush
    President-feckless-odither
    President-obama
    Psychology
    Race-huckster
    Rape
    Recession
    Recipe
    Replace-the-un
    Republican
    Research-studies-are-always-wrong
    Reviews
    Russia
    Salafism
    Sanctions
    Science
    Science-versus-faith
    Self-defense
    Self-drive-vehicle
    Sex
    Shale-oil
    Shia
    Sjw
    Sleeper
    Smart-growth
    Socialism
    Sovereignty
    Sport
    Sunni
    Supreme-court
    Syria
    Tax
    Technology
    Terrorism
    The-fed
    The-house-of-saud
    The-last-economic-superpower
    Therapy
    Trade
    Transit
    True-believer
    Tvfilm-review
    Un
    Union
    Urban-planning
    Urinals-of-note
    Venezuela
    Voter-fraud
    Wages
    Wahhabism
    War
    War-crimes
    Weird
    Weird-science
    Welfare
    Whole-foods
    Work



    RSS Feed

​Maddog's Lair is copyright 2016-2018 by Mark Sherman. Please feel free to quote from this site provided you link back to the original article.
Proudly powered by Weebly
  • Blog
  • About
  • Contact