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Page added on March 18, 2016
IEA warns consumers of spike in oil prices
The International Energy Agency (IEA) is warning consumers not to let cheap oil lull them into a false sense of security amid forecasts of a price spike by 2021.
In a report, the IEA said it expects prices to start recovering in 2017.
But it forecasts that will be followed by a sharp jump in price as supply shrinks following under-investment by struggling producers.
Brent crude touched a 13-year low of $28.88 a barrel in January.
It has since recovered somewhat, but is still far below a high of $115 in June 2014.
On Monday the price was up around 4.9% at $34.62.
Fatih Birol, executive director of the IEA, said: “It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not-too-distant-future.”
‘Enormous stocks’
The policy advisor expects global oil supply will grow by 4.1 million barrels of oil per day between 2015 and 2021, down from an increase of 11 million barrels of oil per day between 2009 and 2015.
It also expects investment in oil exploration and production to fall by 17% in 2016 following a 24% decline last year.
The IEA said: “Only in 2017 will we finally see oil supply and demand aligned but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices when the market, having balanced, then starts to draw down those stocks.”
Global markets have been awash with oil following the boom in shale energy production in the US. That has spurred the Opec oil producing nations, led by Saudi Arabia, to leave oil output unchanged to drive the price of crude down and put pressure on its American competitors.
An economic slowdown in China has also adversely impacted demand for oil.
24 Comments on "IEA warns consumers of spike in oil prices"
Davy on Fri, 18th Mar 2016 11:27 am
Absent more of the bubble economics of the last 10 years including 15 years of robust Chinese growth where is a sustained oil price going to come from? I expect price volatility to occur. How can it not with so much damage being done to the oil complex and sovereign oil producers. This is not the normal supply destruction of the past this is oil supply destruction along with economic destructive change. This destructive change is across the board and probably represent the end of growth. We may be growing now but not with healthy growth. Oil prices may go up but not for long in this type of environment.
PracticalMaina on Fri, 18th Mar 2016 1:16 pm
We have till 2017? Well I plan on exiting the current rat race before then. I also think Exxon may be chopped up into a bunch of little pieces with any liquidity in them extracted for climate reparations. Let some carbon based old money grease the wheels of capitalism, instead of the blood of the little guy. Probably wont happen but its good to be optimistic on a friday 🙂
penury on Fri, 18th Mar 2016 5:47 pm
In a world of shrinking growth, massive debt (gov,corp,indiv) I guess all that is left is Hope.
makati1 on Fri, 18th Mar 2016 7:38 pm
The ‘slowdown’ in China is caused by the slowdown in consumerism in the West and especially the Us. Contraction is the name of the game and the future for the ‘industrialized’ part of the world. Bring it on! Shrink your footprint and prepare now. Beat the rush. The final act is about to begin.
Pass the popcorn.
Bill Simpson on Fri, 18th Mar 2016 8:02 pm
The Saudis and their friends know that the super majors will try to maintain their dividend payments. That means very low oil prices will force them to cut exploration all over the world. They will thus shrink in size, and their future oil production potential will decline. Since there is virtually no substitute for oil, consumers will be forced to buy a greater share of what oil is needed from the Saudis, because the competition will be a shadow of their former selves. The Saudis will then be able to charge whatever the market will bear without risking collapsing the global economy. Hope they can satisfy the demand, because an actual oil shortage will soon bring down the over leveraged financial system. An actual shortage will force the global economy to shrink. That is called a recession. With interest rates already at 0%, there will be little chance of stopping it from turning into a depression with defaults taking out the banks. It nearly happened in 2008. It could threaten again, around 2022.
Apneaman on Fri, 18th Mar 2016 8:10 pm
Medicine Hat reeling after second fracking company announces pullout
“The second Calgary-based oilfield services company in two weeks has announced it is suspending operations at Medicine Hat, removing another 100 jobs from the southern Alberta city’s economy.
The news from Trican Well Service Ltd. on Wednesday follows a March 2 decision by Calfrac Well Services Ltd. to shutter its facilities and lay off 200 people in the city where it was founded.”
“More than 100,000 people are estimated to have lost their jobs in the Canadian oilpatch as oil prices fell from more than US$100 per barrel in June 2014.”
http://calgaryherald.com/business/energy/medicine-hat-reeling-after-second-fracking-company-announces-pullout
shortonoil on Sat, 19th Mar 2016 7:07 am
“The IEA said: “Only in 2017 will we finally see oil supply and demand aligned but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices when the market, having balanced, then starts to draw down those stocks.”
“The price of oil depends on the strength of the economy, and the strength of the economy depends on oil’s ability to power it.”
One would think that the IEA, of all the prognosticators, would realize that when you cut production, you cut demand. It takes energy to produce oil, and that energy comes from the oil produced – one way or the other! To have increased price one needs increased demand, and increased demand can only come with a growing economy. Economic growth is anemic at best, and per capita growth is non existent.
http://knoema.com/mhrzolg/gdp-statistics-from-the-world-bank
Any bounce is likely to be short lived, such as the short squeeze that has now effected the market. It is just difficult for the IEA to admit that it won’t be very long before they won’t be needed anymore!
http://www.thehillsgroup.org/
rockman on Sat, 19th Mar 2016 9:14 am
A – And thus the cycle repeats.
Bill – Valid points but also good to add that while the KSA may realize some advantages years down the road in the interim the are seeing their revenue reduced by $TRILLIONS. And during a time when the potential of additional “Arab Springs” remains if gifts don’t maintain the lifestyles its population takes for granted. In 15 years ExxonMobil management will still exist…the KSA “management” might not. Consider what might happen to the global economy should the KSA go the way of Libya. After all the Shah of Iran had one of the most powerful mi!itaries in the world and look what happened to him.
shortonoil on Sat, 19th Mar 2016 11:03 am
Repeat
“The IEA said: “Only in 2017 will we finally see oil supply and demand aligned but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices when the market, having balanced, then starts to draw down those stocks.”
“The price of oil depends on the strength of the economy, and the strength of the economy depends on oil’s ability to power it.”
One would think that the IEA, of all the prognosticators, would realize that when you cut production, you cut demand. It takes energy to produce oil, and that energy comes from the oil produced – one way or the other! To have increased price one needs increased demand, and increased demand can only come with a growing economy. Economic growth is anemic at best, and per capita growth is non existent.
http://knoema.com/mhrzolg/gdp-statistics-from-the-world-bank
Any bounce is likely to be short lived, such as the short squeeze that has now effected the market. It is just difficult for the IEA to admit that it won’t be very long before they won’t be needed anymore!
http://www.thehillsgroup.org/
makati1 on Sat, 19th Mar 2016 8:17 pm
rockman, do you actually believe that any oil company will continue to exist in 15 years? We will see the rusting remains like we see the old brand signs and rusting gas pumps in some locales now. I don’t give it 10 years. Maybe not even 5. If there is no financial system to finance it, how can it exist? If there are no ‘consumers’ able to buy, how can it exist? Do you really believe that some form of BAU will still exist in 15 years? I don’t.
geopressure on Sat, 19th Mar 2016 8:34 pm
makati1: “will any oil company continue to exists in 15 years???” [paraphrased]
Answer: Yes, one or more oil companies currently operating will still be operating in 15 years.
—
There does seem to be an active effort by the US Government to downsize the Major Oil Companies, at least the ones operating in the US…
I think that of all the BIG Oil Companies in world right now, if I had to choose one that I could own calls on, it would be ENI… NYSE Ticker Symbol: ‘E’… E is going places, & you can write that down…
Boat on Sat, 19th Mar 2016 9:26 pm
geo,
The US rarely down sizes any company. That would be un American.
Boat on Sat, 19th Mar 2016 9:26 pm
geo,
The US rarely down sizes any company. That would be un American.
makati1 on Sat, 19th Mar 2016 9:31 pm
geopressure, it is YOUR opinion, not fact, that they will still exist in 15 years. Perhaps you income/career is on the line? Not that that will matter when the system shuts down. You will only be one of millions who will have to find a new career.
Why do you think that a system, reliant on huge amounts of loans and a huge consumer base able to purchase oily products, can exist when both of those disappear? Capitalism is about over. If you cannot see that then you are blind to all reality, or so it seems to me.
twocats on Sat, 19th Mar 2016 9:33 pm
– And thus the cycle repeats. [rockman]
c’mon you don’t really think we are going to get a repeat of anything resembling the 1983 to 2003 period do you? That was 20 gloriously blissful years for the american and global petroleum user. Maybe crap for you oil people, doesn’t make it the same situation.
2004 to 2008? moving on
2008 – 2010? again, moving on
2011 – 2014? Okay, you had three years of price “stabilitee”
2014 – present – nope.
Are you saying the cycle begins now? So starting in 2016, with prices around $40, they are going to stay in a $40 to $50 dollar range for 20 years? Because that sounds crazy, super crazy to me.
Cycle repeats? I don’t think so.
geopressure on Sat, 19th Mar 2016 10:47 pm
makati1;
I can’t imagine how my choice of profession would factor into the equation…
I simply do not share your doom & gloom opinions with regards to capitalism. I feel like most of your beliefs are shortsighted & based upon an incomplete understanding of the capitalistic system. But, that is just my opinion, I’m sure that you (& perhaps others here) feel that you are an expert on the subject at hand – I just do not…
To put my personal opinions regarding capitalism to words (in the simplest form possible), I think that our system has too much momentum to be toppled in 15 years time. The U$D will likely fall in the next 10-15 years, but not capitalism.
I think that it’s safe to say that a healthy percentage of oil & gas operators in existence today will still be in operation 15 years from now…
makati1 on Sun, 20th Mar 2016 7:32 am
geo, your choice of careers bends your perception of the possible future. Like the makers of buggy whip probably denied that their incomes would ever be endangered by that noisy, smoking, mechanical contraption called an automobile.
You can deny all you want. It does not change the direction we are headed at a faster and faster pace. The System is collapsing all around you yet you seem to believe that it will last 15 years or more. It could all be gone tomorrow. How? An EMP, either natural or man made, that wipes out all of those nice little ones and zeros in the banks and Wall Street not to mention killing off a few hundred million cars and trucks and other electronics that keep our system going. Or maybe some other little occurrence like World War 3. Or even faster by a nuclear exchange.
Wanting your future to be secure and BAU is not going to make it so. You live in the most vulnerable country in the world for collapse. Total collapse with no recovery likely.
Careers with no future:
Geologists
Psychologists
Radiologists
Economists
Bankers
Corporate officers
Petroleum engineers
Most engineers (especially IT)
Most professors
Investment counselors
Management of all kinds
Etc.
Any profession that is not a real necessity will not exist.
Suggested careers:
R. Nurse
General practitioner (Dr.)
Midwife
Farmer
Carpenter
Plumber
Etc.
Think 1800s (or earlier) careers.
You can ignore the facts, but you cannot ignore the results of ignoring the facts. (paraphrase)
Davy on Sun, 20th Mar 2016 7:41 am
“I think that it’s safe to say that a healthy percentage of oil & gas operators in existence today will still be in operation 15 years from now” At this point in time the “yes” and “no” bet are both not safe. Both are goal seeking an agenda. We just don’t know how this power down is going to proceed. In my opinion 15 years is within a range of possibilities of either results. A 5 year projections is reasonable considering how quickly we could see a deterioration.
We could surely say that oil and gas will be markedly different in 15 years. Destructive change is happening. Economic demand is deflating and decaying. Anyone denying demand destruction from years of excesses should ask why are we to NIRP and helicopter money ideas? China is clearly in a spiral down and China was the only growth engine left globally.
Oil and gas potential is being destroyed now. The longer this downsizing goes on the more significant the lost potential of the industry will be. Even if we see a period like the cornucopians claim is ahead of a return to solid healthy growth the support from oil and gas industry will have been diminished to the point of no longer allowing growth. The same is happening in the coal industry. It will likely happen to alternative energy. By the way alternative energy and EV technology has not reached a size to make a difference nor will it likely ever.
What we have now is likely what we are ever going to have. We quite likely could be at peak everything. The question should be are we on the bumpy plateau or a bumpy descent. At what point will a bumpy descent turn into a collapse. We are talking time variables of duration and the shape of the move which is degree. Oil and gas is going through terminal changes the question is how long and how hard.
geopressure on Sun, 20th Mar 2016 8:16 am
makati1; I’m in the business of procuring illegal goods for wealthy people on the black market…
What’s your poison? Cocaine? Heroin? Hand Grenades? Oxycontin? Fully-Automatic H&Ks? If you want it bad enough, I can deliver…
I hate Hippies though, so no weed, acid, or shrooms… People who fuck around with Hippies end up in prison.
I also execute about a handful of options trades per week… Thats right, all of these ideas that I have that are routinely dismissed on these boards put a couple grand per week in pockets… But I guess there will be no futures markets & no stock markets in your idea of the future, Right???
geopressure on Sun, 20th Mar 2016 8:31 am
Davy, No one is powering anything down…
Right now, or this coming summer, there is not enough Crude Oil to meet demand & all the Storage Safegards have been exhausted manufacturing a fake oil ‘glut’…
There is no “Power Down”… Your Government has tricked you into thinking that there is going to be a big power down to help explain why there will be rolling blackouts on the grid all summer long…
You guys are smart, you wouldn’t be spending time on this website otherwise… Why can’t you guys figure this shit out on your own? it’s all be done before in just 1986 – It’s how we won the Cold War… Now it’s happening again… The regular posters here should be the ones in ‘the know’… There is simply not enough oil to feed all the refineries & power plants right now & it will get worse before it gets better…
If you lived in Nigeria you would have been doing without fuel since Winter 2014, but because ypou are American (I’m guessing) you have the privilege of being the last to suffer. Not because Americans are special, but because the futures traders who set the price of oil happen to live in America… If the government is going to fool them, then they must fool ALL Americans…
Any story that goes against this facade is never recognized by Google & the world remains ignorant… However, you guys are the ones who should be all over this situation…
Davy on Sun, 20th Mar 2016 9:12 am
Geo, it would be wonderful if it were true. Time will tell. I have a great life as is and I am preparing for a life with a lot less. I am under no illusions of how difficult less could be.
Geo, your kind come and go. You just started posting. Let’s see how much staying power your optimism has. So many cornucopians have come and gone with failed optimism on this board over the years. Let’s see what you are made of. World events are not very positive so you have a headwind to start with. Good luck but don’t get your hopes up too much.
makati1 on Sun, 20th Mar 2016 9:39 am
Geo, you are correct. No markets except the local farmer’s market. The Stock Market is a creation of the Age of Petroleum. It will die with that same Age. Soon.
The world managed quite fine for all but the last 100 years without oil or a stock market. It will again. After your type commits suicide or die by the hands of the more able. Most of the 7+ billion of us still manage without the stock market or even oil. You grew up in a coddled society and have no idea of the real world. Grow up and get a
pair and look beyond your blinders and conditioning.
geopressure on Sun, 20th Mar 2016 9:52 am
makati1;
I have a pair, & I’m alway looking for signal as to what the future holds – that is how I make a living… The fact that I do make a living tells me that my view is not obstructed by blinders…
I just can’t se what it is that you seem to see so clearly…
—
& not that it matters, but I own two farms… I suspect that I’ll survive in the event that you turn out to be correct…
Davy on Sun, 20th Mar 2016 10:09 am
Makati-dumb[1], who are you to consider you are one of the chosen ones? You make me sick with your narcissistic grandiosity. You of all the people on this board should have the most to fear. You are an old man facing a tough situation and acting like you are twenty again. What a joke!