The Brent oil price was virtually unchanged Friday at $57.08. News was mixed with the US rig count coming off again falling 6 to 857:
Offsetting that was a strong US dollar and decidedly bearish IEA in its monthly oil market report:
Oil prices tumbled again in the last month, with front-month WTI futures down about 14% and Brent roughly 10% lower at the time of writing. That is a testament to the continued headwinds facing the oil industry, a recurrent theme of thisReport. The rebalancing that began when oil markets set off on an initial 60% price drop a year ago has yet to run its course. Recent developments suggest that the process will extend well into 2016, as shown in our quarterly supply/demand balances for that year, unveiled here for the first time.
…The rolling out of next year’s oil market forecast, a rite of summer for this Report, is an opportunity to revisit the projections of the Medium-Term Oil Market Reportreleased in February. To be sure, some of the intervening developments have come as a surprise: the financial market’s exuberant response to the falling US rig count, the persistent vigour of North American supply, the odds-defying, record-breaking surge in Russian and Brazilian output, the paradoxical race of Riyadh and Baghdad to scale new production highs. The expected timing of the rebalancing has shifted a bit, but the story line has not changed. The supply response to lower prices is on the way, and US light tight oil (LTO) production is feeling the impact. While LTO output may be more price sensitive than conventional crude supply, it cannot stop on a dime: lags remain. Barring a major supply disruption elsewhere, it may also take another price drop for the full supply response to unfold.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
Oil prices tumbled again in the last month, with front-month WTI futures down about 14% and Brent roughly 10% lower at the time of writing. That is a testament to the continued headwinds facing the oil industry, a recurrent theme of thisReport. The rebalancing that began when oil markets set off on an initial 60% price drop a year ago has yet to run its course. Recent developments suggest that the process will extend well into 2016, as shown in our quarterly supply/demand balances for that year, unveiled here for the first time.
unt, the persistent vigour of North American supply, the odds-defying, record-breaking surge in Russian and Brazilian output, the paradoxical race of Riyadh and Baghdad to scale new production highs. The expected timing of the rebalancing has shifted a bit, but the story line has not changed. The supply response to lower prices is on the way, and US light tight oil (LTO) production is feeling the impact. While LTO output may be more price sensitive than conventional crude supply, it cannot stop on a dime: lags remain. Barring a major supply disruption elsewhere, it may also take another price drop for the full supply response to unfold.
