OPEC is the talk of the town today after they released their monthly report yesterday. A tighter oil balance is on the horizon as the EIA estimates the call on OPEC crude in 2015, at 28.75 mbpd and 29.75 mbpd respectively. OPEC sees demand for their crude at 29.34 mbpd for the whole of 2015 and 30.30 mbpd for 2016. The most bullish is the IEA with 29.70 mbpd and 31.30 mbpd for their demand estimates.
Regardless, it seems that 2016 will be tighter than 2015. This view is confirmed by the majority of price forecasters surveyed by Reuters and with contango in the market. They expect next year’s oil prices to be above this year’s. Year-to-date average Brent and WTI prices combined with the balance of 2015 curve show that Brent should average between $55-$56/bbl this year and the WTI just above $50/bbl. This compares with the current 2016 curve of around $53.00/bbl for Brent and $49/bbl for WTI.
So why are oil prices so low these days? Some underlying factors are the stock market and the Chinese economy, but the main reason it is low is from an oversupply of crude in the global market and weaker demand overall.