Shutterstock photo
Markets

Oil Market: EIA Out Saying Good and Bad

Shutterstock photo

Shutterstock photo

EIA out this AM saying crude oil output is to soar into 2020 so why are we trading higher on oil?

Public Domain image courtesy the U.S. Coastguard: http://commons.wikimedia.org/wiki/File:Development-driller-3.jpg

Watch the Brent-WTI spread as a barometer for just how bad the supply issue remains. The spread we said last week could hit $15 by mid-summer.

The US government agency EIA is saying that the USA will produce 10.6mbpd in 2020 which s1m more barrels/day than forecast a year earlier. Core production will then moderate to 9.4mbpd by 2040 but this is still a 26% increase over where they were last year. They are also forecasting a faster drilling pace (drillers as a sub-sector have been abandoned. Want to rethink that strategy??)

Right now however oil ( USO , quote ) analysts are caught between the horrendous supply forecasts and the oil price which is hanging around these levels very well and a futures curve that says it will reward longer term vision on investing in oil.

Frankly, oil volatility is set to stay higher and everyone is piling into bearish views when we see prices move lower but quickly are reversing and claiming victory over the bear mkt in oil when we see the type of 25% move off the bottom that has taken place in the last month.

In addition to the above, the EIA forecast of 2015 global demand raised by 90kbd to a gain of 1.1Mbd year on year compared to the 0.7Mbd gain in 2014. However, global supply rose by an estimated 1Mbd month/month in March on sharply higher Saudi and Iraqi output and resumption of supply from Libya.

  • XOM, TOT, APC, EOG, HESS
  • SDRL, RIG are high beta drilling plays

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos