The International Energy Agency (IEA) released its September oil market report yesterday and it does not paint a rosy picture for oil prices. The report indicates that global oil demand growth is slowing at a faster pace than originally predicted. IEA expects 2016 demand growth to be 1.3 mb/d, versus its initial prediction of 1.4 mb/d. Additionally, the agency found that near-record OPEC production almost entirely offset steep production declines for non-OPEC producers and that non-OPEC production will grow in 2017.
On the U.S. economic front, it’s looking less likely that the Fed will increase interest rates at next week’s FOMC meeting. On Monday, Federal Reserve Bank Governor Lael Brainard advocated for prudence regarding rate increases, given the lack of evidence that inflation is rising, coupled with a belief that the labor market is not at full strength.
A couple of other items of general interest:
- Oil exporters are responding to low prices and increased competition for market share by finding business is fairly unexpected places, according to Bloomberg.com. A few examples:
- With the U.S. now allowed to export crude, shipments have recently gone out to countries such as Curacao, France and Israel.
- OPEC members have been trying to muscle in on Russia’s European market share, with Saudi Arabia sending oil to Poland and the United Arab Emirates shipping crude to Romania.
- Algeria is exporting oil to faraway customers in Indonesia, Cuba and Australia.
- As reported by Bloomberg, analysts at investment research firm Sanford C. Bernstein point out that Google searches for the phrase “too much oil” now outnumber searches for “Peak Oil.” The chart below illustrates the dramatic shift in what’s on the minds of oil market professionals. The primary point the analysts are making is that the oil market too often focuses on the short term and a particular narrative to predict prices.