Supply-driven oil decline demands a response from OPEC – Deutsche Bank

By FXStreet FXStreet (Delhi) – Michael Hsueh, Research Analyst at Deutsche Bank, notes that there is a clear distinction between the oil-price declines of 2008-09 and 2014-15 in that a disappointment in demand was almost entirely responsible in the first case, while in the current episode, supply strength has been the primary driver.

Key Quotes

“In the current episode of low prices, we see the exploitation of US tight oil reservoirs of low permeability and low porosity as the primary driver, with OPEC inaction as a major contributor. US production growth in 2012 and 2013 averaged 1.1 mmb/d, a tripling from the 2009-2011 rate, and satisfied 95% of world demand growth on its own in these two years.”

“In 2014, US production growth surged further to 1.7 mmb/d, beating the start-of-year forecast of 1.0 mmb/d. Production from non-OPEC Middle East, Europe, and Asia stemmed declines seen in preceding years, while Brazil jumped by 230 kb/d. In total, non-OPEC supply grew at 2.4 mmb/d in 2014, or triple the rate of world oil demand growth in 2014.”

“In contrast to 2008 and 2009 when oil demand fell for two consecutive years, world oil demand still grew in 2014 at 811 kb/d yoy, although less than the …read more

Source:: FX Street