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Page added on May 28, 2015

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End of Oil Glut Seen Nigh as World’s Use Set to Top Production


Make the most of abundant oil because by the end of the year the world may be consuming more than it pumps.

The global crude market will shift into a deepening deficit in the fourth quarter amid a draw down in U.S. stockpiles, according to Standard Chartered Plc. While Qatar’s former oil minister says there’s currently a surplus of 2 million barrels a day, Sanford C. Bernstein Ltd. sees demand outpacing supply by 1.5 million a day by the fourth quarter.

Oil has recovered almost 40 percent since January on signs that a slowdown in U.S. drilling will alleviate the glut that drove prices to the lowest in six years. U.S. crude inventories probably shrank for a fourth week through May 22 after surging to the highest in 85 years, a Bloomberg survey showed.

“By the second half of this year we will go from being oversupplied to being undersupplied,” Neil Beveridge, Bernstein’s Hong Kong-based analyst, said by phone Wednesday. “Once we see U.S. production growth come to an end, with demand growth running at about 1.5 million barrels a day, we’ll see a significant tightening in the market.”

Brent crude was at $62.31 a barrel on the London-based ICE Futures Europe exchange at 8:02 a.m. in Singapore, up 38 percent from an almost six-year low of $45.19 on Jan. 13. West Texas Intermediate, the U.S. benchmark grade, traded at $57.70, after dropping as low as $42.03 on March 18.

Brent Rebound

Brent will rebound to $80 a barrel in the short-term while U.S. prices will rise to a range of $70 to $75 as demand growth outpaces new supply from countries outside the Organization of Petroleum Exporting Countries, according to Bernstein. Standard Chartered sees the European benchmark at $90 by the fourth quarter and WTI at $84.

“The start of sustained U.S. inventory declines is a significant milestone for the oil market,” analysts at the bank including Paul Horsnell wrote in a report dated May 26. “Virtually all the global build in commercial inventories so far in 2015 has occurred in the U.S. The end of this build is likely to be an early warning of a shift into deficit for the global market as a whole.”

While oil demand may pick up in summer, the slowdown in U.S. drilling isn’t big enough to lower production and excessive supply will continue to prolong the surplus, according to Goldman Sachs Group Inc. The market will remain “well oversupplied” through 2016, the bank forecast in a May 22 report, also citing sharp growth in output from low-cost suppliers.

U.S. crude inventories decreased to 482.2 million barrels through May 15, the Energy Information Administration reported last week. Supplies are still near the highest level since 1930, based on monthly records from the Energy Department’s statistical arm dating back to 1920.

OPEC Meeting

U.S. crude supplies increased by 1.3 million barrels through May 22, the industry-funded American Petroleum Institute was said to have reported Wednesday. Government data Thursday is forecast to show inventories decreased by 2 million barrels, according to a Bloomberg survey.

OPEC will keep its daily production target of 30 million barrels a day at its June 5 meeting in Vienna, according to all but one of 34 analysts and traders surveyed by Bloomberg.

The Saudi Arabian-led decision to maintain output at OPEC’s last gathering in November accelerated the collapse in oil as the group favored market share over prices in a bid to drive out high-cost producers.

With oil companies around the world cutting investment, U.S. output peaking and prices rebounding, the strategy will be extended next week, say Societe Generale SA and Bank of America Corp.


21 Comments on "End of Oil Glut Seen Nigh as World’s Use Set to Top Production"

  1. penury on Thu, 28th May 2015 11:39 am 

    I just admire the people who cannot tell me what the oil market will be like tomorrow but, with complete confidence will tell me what it will do in six months.

  2. Sugar Seam on Thu, 28th May 2015 1:03 pm 

    Goldman still insisting oversupply through next year…. whats their math like?

  3. Northwest Resident on Thu, 28th May 2015 1:20 pm 

    The underlying, unstated message is:

    Despite the fact that those lousy Saudi’s flooded the market and created this glut, that glut will soon end due to increasing demand and economic pickup, so by all means, keep your money invested in oil companies — you can’t lose!

  4. Plantagenet on Thu, 28th May 2015 4:03 pm 

    Why is this so hard for people to understand? We’ve been in an oil glut and oil prices have been cheap but increasing demand will eventually end the glut and oil prices will go up.

    E Z P Z

  5. GregT on Thu, 28th May 2015 4:32 pm 

    Still trying to solve an advanced math problem with grade 3 arithmetic planter?

    It really is no wonder as to why you are so confused.

  6. welch on Thu, 28th May 2015 4:42 pm 

    Actually, plant makes pretty god sense on this one.

  7. roman on Thu, 28th May 2015 4:59 pm 

    The end is near Plants. Run In Place.

  8. shortonoil on Thu, 28th May 2015 6:06 pm 

    Historically, production growth has been 10 times greater than what has occurred in recent years. Historically, the economy easily absorbed that extra production. That is obviously not true today. The economy is having difficulty utilizing even the meager increases that are now occurring.

    We believe that is because the oil of today is not the same as the oil of yesterday. Producers for the last 150 years have continuously extracted the best, highest value product. What remains is oil of such low quality that it can not even generate enough demand to produce a market for any increase. Petroleum is losing its ability to power the economy.

    This is a natural consequence of depletion. The quality of a resource becomes lower, and lower as time progresses. The value of the resource declines with the quality. The present low price environment will only deteriorate as petroleum’s quality falls. The best has been extracted, and burned. Profits were made. That was yesterday!

  9. steve on Thu, 28th May 2015 9:57 pm 

    I think you are right short…the countries of the world have bastardized their currencies that there is nothing left…I found this to be an interesting debate…Foss believes we will go into massive deflation and then our banks will reposes everything to protect the 1 percent…I think that is where she is wrong..but hey I could be wrong too!!

  10. agramante on Thu, 28th May 2015 10:40 pm 

    It might be a semantic difference, but I’ve hesitated to call this price crash a glut because it’s so transient. In the 80’s, when Iran was flat on its face, Saudi Arabia rested its fields, and the North Sea and North Slope were newly online, we had a real glut which lasted years. We’re not quite yet at one year since the price of oil started going down. I have trouble calling such a short-term oversupply a glut. It seems more to me just a symptom of the economic and price volatility we can expect in years to come the further we head into the post-peak oil era.

  11. GregT on Fri, 29th May 2015 12:16 am 

    Historically, the oligarchs lived in castles, while the masses worked ‘their’ lands for a pittance. The only difference between then and now? Cheap energy has allowed some of us to live more extravagantly than the kings and queens of old. The kings and queens of today, however, still live in their castles, and we still collectively pay through our labour to support their lifestyles.

    When the energy and resources run out, the oligarchs will still rule the masses. Those that make it through the bottleneck, if any of us do.

    What we are witnessing right now is the final fight for global domination. The end game so to speak, or in their own words, the New World Order. They are not fighting for us, they are using propaganda to make the masses believe in their cause. To fight and die for our oligarchs.

    This game has been played for centuries. It is amazing how few people are able to figure it out. They are not hiding their intentions from view. They think that the masses are too stupid to get it, and for the most part, they are correct.

  12. Apneaman on Fri, 29th May 2015 12:52 am 

    Greg, we do have more material wealth and other things no one else had, but the pre industrial citizen had benefits we do not have. All part of the unchallenged modern myth that life was nothing but nasty, brutish and short prior to modernity and capitalism. Thus we should be eternally grateful for our masters and lot in life. A lot of that myth stands on shaky ground. There is plenty of evidence that counters the myth, but it has become a cultural assumption and rarely gets challenged. Here is but aa sample.

    Pre-industrial workers had a shorter workweek than today’s

    “One of capitalism’s most durable myths is that it has reduced human toil. This myth is typically defended by a comparison of the modern forty-hour week with its seventy- or eighty-hour counterpart in the nineteenth century. The implicit — but rarely articulated — assumption is that the eighty-hour standard has prevailed for centuries. The comparison conjures up the dreary life of medieval peasants, toiling steadily from dawn to dusk. We are asked to imagine the journeyman artisan in a cold, damp garret, rising even before the sun, laboring by candlelight late into the night.”

    “Primitive” Ancients

  13. GregT on Fri, 29th May 2015 1:03 am 


    I would be more than happy to unplug myself from the system, but that would mean squatting on ‘crown’ land. Punishment up to and including imprisonment, and they would burn my house to the ground.

  14. Apneaman on Fri, 29th May 2015 1:34 am 

    Can’t escape the system or time you live in Greg. Maybe move to another country, but they will have one too.

  15. theedrich on Fri, 29th May 2015 1:41 am 

    Nothing to worry about mates.  The invading Muslims will soon teach all of us how to be serfs submissive to the religion of Submission and to live according to medieval standards where everyone is equal except the local sheik:

  16. Apneaman on Fri, 29th May 2015 1:54 am 

    Oh look, another techno-utopian letting us know everything is going to be awesome. So many of them lately I can’t keep up, but this guy is something else.

    Data will replace oil as source of energy: Alibaba’s Jack Ma

  17. GregT on Fri, 29th May 2015 1:56 am 

    No ‘invaders’ where I’m headed thee, only the same old shit.

    No point in moving Apnea, this shit is good as it gets.

  18. GregT on Fri, 29th May 2015 2:06 am 

    Nice article Apnea, I’m hoping that something huge was lost in the translation.

  19. Davy on Fri, 29th May 2015 6:53 am 

    Ape Man/Greg, your comment on kings and castles hit a cord with me. We have kings today who are the 1% of the 1%’ers. These are the very high net worth individuals. We also have the connected political, military, and security elite that are kings of organizations. These folks are playing the game and control the dice.

    You then have the 1%ers. These folks my family falls into. We have a medium to large size family business. I have been out for 12 years so I am not part of this but I do enjoy the crumbs that fall down. My family is solid 1% but even they do not have the power and the money of the very wealthy. The 1%er have their own pecking order. I would equate them to the nobles and princes of old. The kings need the noble’s allegiance. There are many modern nobles and they do not control people like the kings.

    This group I personally believe will be the group who initiate the economic revolution when it gets bad enough. These are all those people who are connected and smart enough to effect change once their lot goes bad. The problem is this effected change will be collapse because BAU cannot be reformed or undergo managed degrowth. These 1%ers will bring the 1% of the 1%ers down by sheer numbers and power in those numbers. This is what I am now waiting for with the economy. If it gets bad enough the 1%ers will challenge the 1% of the 1%ers IOW the kings.

    As for the bottom most of us are really just serfs of the economic system. I have left the system as much as I can but since I must use BAU to transition out of BAU I too am a serf. The system controls us in all kinds of ways from debt, to laws, to position, and location. The very wealthy have an army to deal with this. The very wealthy have the ability transit borders. We the serfs are stuck in our locals for the most part.

    Many of us are still doing very well relative to previous times materially but what about our lives. Do we really have what many had years ago? I would say no. Efficiency and the drive for progress has destroyed our culture and our environment. Sure we have the comforts and the medical system but we live in a plastic robotic world.

    I would also like to mention preindustrial man and many native cultures that were in locations with good food potential and not in overshoot. They lived well IMHO and better than we do. They had shorter harder lives but that was more than made up for by meaningful lives with connectivity of community and faith.

    I have a library of books on the Osage tribe who were Native Americans in MO, AR, and OK. They lived very good lives that can be attested to by their statue averaging 6 foot and strong. They had a good balanced diet and little problem with destitution until the white man.

    It is unfortunate that our coming collapse cannot go back to these periods for multiple reasons. We have destroyed the knowledge and culture to live like they did. We have destroyed the ecosystem and climate. When we collapse we face a difficult business of rebalance of consumption and population. We will have to do this in a world with a declining and failing ecosystem. Our climate may go into runaway climate change. We will likely not have the stability to properly reassemble the knowledge and skills that our forefathers had to live decent lives pre-industrial revolution.

    Unfortunately it may be a 500 years of decay and darkness before we can reassemble man into a postindustrial society. I imagine without a stable climate and destroyed ecosystem that will most likely be semi-nomadic hunter gathers with small scale Ag. That is if we don’t go extinct in the coming bottleneck.

    This descent may not be terrible for all of us. This may be a long emergency where we can negotiate our way down in a hybrid life of salvage and the relearning of new skills. Yet, even this life will decay along with the decay of all that supported BAU and would support our hybrid life. Yet, we could have a period of 10 to 20 years of a long emergency.

  20. Davy on Fri, 29th May 2015 7:12 am 

    Steve said “Foss believes we will go into massive deflation and then our banks will reposes everything to protect the 1 percent”. Steve this is not possible longer term. It may happen over 1 or 2 years and not at any significant level. You can’t reposes much and still have a functioning economy. Eventually the repossessions will overwhelm the system’s ability to repossess. I know I used to repossess equipment and it is hard work and must be digested by the business. Profits are destroyed and the repossessed asset usually always had significant depression of value.

    This will likely happen initially just because this is the law and custom. Eventually and I would speculate soon after we will have a debt jubilee by default but that jubilee will not be a happy one. That jubilee will be in collapse of the global and our locals into food and fuel shortages. IOWs we will be hungry and destitute in our debt jubilee and so will the 1%’ers.

    BAU supports all delocalized locals with a global dependence. We are in overshoot with consumption and population. Both are needed to give BAU a healthy growth averaging 3% for the system to hold together. Once growth goes absolutely negative global confidence will be lost and with it the liquidity needed to run the interconnected system that supplies all our locals. I say absolute growth because currently we do not have real traditional growth of a society expanding in a healthy way. We have manipulations, corruption and wealth transfer in a shrinking pie. This is working now because the powers to be are still benefiting. At some point this will end because a house of cards can only be built so high.

  21. Revi on Fri, 29th May 2015 7:27 am 

    Told them this would happen! It will be small consolation telling them “I told you so”, but it will be sweet…

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