Global oil surplus to disappear gradually next year 

The oil markets are concerned that there is too much oil currently available on the market, and that, as a consequence, oil prices may continue to tumble. Saudi Arabia is reportedly telling Reuters that it is happy with prices that may fall as low as $80 a barrel.

The effect will also have the benefit of a boost to the economy, which of course can’t hurt in the run-up to an election. But in the longer term it is hard to see how this boost can be sustained for more than a year.

Part of the problem in projecting the balance revolves around estimating the production from Libya, Iraq and Iran (LII). Libya has reported raising production back to around 800 kbd, but some of that comes from the Sahara field, which was still involved in factional fighting, even as it came back on line at some 20% of normal.

Supplies from those outside the cartel and the Americas are continuing to decline. That is not going to change. The rates may fluctuate a little (though the current drop in prices is not going to encourage large scale investment in declining fields) but the overall trend is steadily downward. And it is within that picture that potential changes in the production from the three LII countries have to be placed.

Putting this within the context of OPEC, I suspect that overall production will not fall much outside of the current volumes that the MOMR are predicting – which is sensibly overall stable output over the next year or so. And if that is the case, then I would, as mentioned last time, expect to see that the global surplus of oil supply over demand will gradually disappear over the next year, with the impact becoming evident once we reach the summer of 2016. It would be nice to be wrong, but I think it unlikely.

Source: oilpricecom- Global Oil Surplus To Disappear Gradually Next Year

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