Technical & Fundamental Oil Reports Specialists

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Oil gloom deepens

Published Tuesday, March 17th, 2015

Equity markets started the week strongly but oil markets continued to labour under bearish news. There is a common link via US interest expectations and the impact on the dollar but beyond that the oil markets have so much more to worry about. The most important of which is the huge excess of supply, the slow response of consumers and producers to the price fall and the possibility of an Iranian nuclear deal releasing additional supplies.

We review the latest oil supply and demand forecasts below. In the here and now the oil picture is gloomy. Global stocks are building at a rapid rate and, to the extent that anyone can get a handle on available global storage space, the consensus is that it is somewhere between 60 and 70% full. Genscape believe that Cushing stocks have risen to just under 60 million bbls. With a working capacity of 71 million bbls according to the EIA, that only leaves capacity for six weeks of builds averaging 2 million bbls per week.

Whilst the second half of the year promises an uplift of 1.5 mbpd in the call on OPEC, there is still a very difficult 2Q to traverse where the consensus call falls to 28.43 mbpd, which is 1.6 mbpd below the current OPEC production level. From mid-March to the end of 2Q global stocks are set to build by another 160 million bbls.

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Posted by David Hufton