Following IEA’s report this morning which proclaimed OPEC production at record highs but forecast a drop in the global oil glut in the first half of the year (due to demand from India, as the current marginal demand driver – China’s teapot refiners – have since slowed dramatically), WTI crude prices have jumped back above $47 for the first time since November 2015.
Strength in the first quarter was driven by China, Russia and by transport fuel use in India, which is “taking over from China as the main growth market for oil.”
As Bloomberg reports, the global oil surplus in the first half of this year will probably be smaller than previously estimated because of robust demand in India and other emerging nations, the International Energy Agency said.
Supply will exceed demand by an average of 1.3 million barrels a day in the first six months of 2016, down from the 1.5 million projected a month ago, following surprisingly strong consumption in the first quarter, the Paris-based adviser said in a report. Still, further gains in oil prices “are likely to be limited by brimming crude and products stocks,” it predicted.
“Changes to the data in this month’s report confirm the direction of travel of the oil markets towards balance,” said the agency, which advises 29 of the most industrialized nations on energy policy. “The global supply surplus of oil will shrink dramatically later this year.”
The diminished glut indicates that OPEC’s policy, driven by de facto leader Saudi Arabia, to let lower crude prices re-balance world markets is taking effect. Oil futures closed at a six-month high above $46 a barrel in New York on Wednesday as supplies were tightened by declining U.S. drilling, wildfires in Canada and disruptions in Nigeria.
Of course, the glut remains at ‘unprecedented’ levels and any rally will be self-defeating as we already heard from various US shale producers who will come back online heavy once prices hit $50..
via http://ift.tt/1sgQE5V Tyler Durden