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Stock and commodities markets

U.S. DoE Predicts Oil Market Oversupply over the Next 2 Year


The United States Department of Energy doesn't believe in the OPEC+ deal and expects excessive supply in the global market over the next 2 years. In particular, the January short-term report released by the DoE confirms that. They say this is going to be long-term oversupply.
 
Apparently, the oversupply is expected to take place as the result of the shale oil renaissance in the USA, Canada and other oil nations not participating in the mentioned oil agreement that was designed to cap the production and balance the market to let the prices grow to comfortable levels. Those nations are expected to export 2,4 million barrels a day.

On a global scale, the global supply is expected to increase by 2,8 million barrels a day, which the highest increase since 2014. At the same time, the global demand for crude oil is expected to grow by as little as 1,7 million barrels a day. Apparently, Asian exporters are expected to contribute to this demand growth since Europe is unlikely to consume more crude oil than today. Canada
isexpectedtocutdownontheconsumption.

Last year, the average daily production and consumption stayed at 97,97 million barrels and 98,38 barrels respectively. This made the oil inventories decrease, which consequently led to a 30% increase in oil prices all the way up to 69 dollars per barrels for Brent oil, which became the highest price since December 2014.

However, the DoE experts believe that the party is almost over for the OPEC and some of their allies. The thing is that the oil producers altogether are expected to start producing 0,2 million barrels a day more than consumed worldwide, and the oversupply is going to increase up to 0,35 million barrels a day in 2019. In some quarters, the oversupply may increase to 1 million barrels a day.

This means that the OPEC+ deal is probably doomed to fail. The thing is that the commercial oil inventories are expected to grow all the way up to 2,964 billion barrels against 2,908 billion barrels in December 2017, to 3,049 billion barrels on late 2019.

 


At the same time, the DoE predicts a faster-than-expected increase in the American shale oil production. To be more specific, the forecast was raised from 10,23m b/d to 10,58m b/d, to 11,4m b/d in 2019, FortFS experts report.

 

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