- August 11, 2015
- Posted by: Art Berman
- Category: The Petroleum Truth Report
The EIA Short Term Energy Outlook (STEO) published today reports that world oil supply decreased 130,000 bpd and demand increased 380,000 bpd in July compared to June. This reduces the relative production surplus (supply minus demand) by 510,000 bpd to 2.3 mmbpd (Figure 1).
U.S. crude oil production decreased 100,000 bopd in July compared to June.
As I wrote in my post yesterday,
“Don’t get me wrong: this is not going to be anything dramatic but, if I’m right, it will add another month of data that suggests flattening production and increasing demand.”
Figure 1. World liquids production, consumption and relative surplus or deficit. Source: EIA and Labyrinth Consulting Services, Inc.
(click to enlarge)
The world still has a huge problem with more than 2 million barrels per day of surplus production and I don’t want to minimize that concern. Nor do I want to offer false hope that oil prices will rebound as a result of this new supply and demand data.
Oil futures have fallen considerably today on news that China will devalue its currency and prices could fall further. I recommend that you read my colleague Euan Mearns’ post today on that troubling possibility.
The significance of the EIA STEO is that we now have two months of data that show the potential beginnings of a trend toward a more balanced market. I await IEA’s Oil Market Report tomorrow for more insight.
Art, thanks!
A gap between supplies and demand/consumption of about 2 Mb/d should end up somewhere, like in stocks. This does not appear to happen.
There have been several episodes of “missing barrels”…..so any guess on what goes on?
You are right, Rune. That’s why I pointed out that the discrepancy between EIA and IEA volumes in my post yesterday means that the data is not very good. Like you, I suspect that the surplus is lower but that’s the data we have to work with.
OPEC’s MOMR from yesterday was fairly understated about market balance and did not reinforce El-Badri’s comments late last month that he doesn’t expect any future drops in oil prices “because the demand is growing now and the growth will continue in 2016. The oil production level is decreasing.”
I also don’t find support in the data for Andy Hall’s comments that demand is “on a tear.”
Thanks for your comments,
Art
Mr. Berman,
Thanks for the update. What do you make of some media reports that Saudi Arabia says they reduced production by 200,000 barrels in July – that doesn’t seem to be in the July data for OPEC?
Mr. Yamaguchi,
According to the August EIA STEO report, Saudi Arabia increased crude oil + condensate production for July by 200,000 bopd compared to June, from 9.6 to 9.8 mmbpd. It sounds like the media got the number right and the direction of change wrong.
All the best,
Art
EIA data is inherently unstable right now. To wit, December 2014 demand was adjusted up by a whopping 1.4 mbpd compared to the Dec 2014 contemporaneous estimate. Are we really to believe that global demand is up 1.3 mbpd for July yoy, when the US is up almost 900 kbpd by itself? Or should we add the same error factor we say last December, bringing July on July demand growth to 2.7 mbpd?
You know my opinion.
Steve,
Thanks for your comment. As I commented back to Rune earlier today,
All the best,
Art