“Supply and demand patterns indicate that the long-term fundamentals of the oil complex remain robust” said Prince Abdulaziz bin Salman in a speech at an Asian energy conference in Qatar a couple weeks ago. The Saudi Arabian Oil minister seems to be okay with continuing their low price strategy, even if it runs the risk of decreasing supply long-term, rather than cutting production. To branch off of Salman’s thoughts, the Qatar energy minister says low prices could hurt supply in the long run. Mohammad bin Saleh al Sada stated “The decline in oil prices is threatening not just the economy of this continent, but also risks discouraging investment in the future.”
The IEA believes that oil is unlikely to return to $80 a barrel before the end of this decade. The drop in oil to $50 a barrel this year has triggered steep cutbacks in production of U.S. shale, which is one of the major contributors to the extreme oversupply we have seen in the last year. The IEA also expects:
- China to double its energy consumption compared to the U.S. by 2040
- Investments in oil will decline more than 20% because of the prolonged lower prices.
Taking a step back to present day, diesel is currently up a penny as of 12:30 PM ET, while gas remains flat. Crude is up $.65 to $44.49 after being nearly $1.00 lower earlier this morning.
Current market news:
- Brazil’s Petrobras and unions failed to reach an agreement over worker demands. Being the biggest strike in 20 years, there are risks of fuel shortages arising.
- Oil prices rose after the head of OPEC forecast a more balanced market next year and the U.S. Department of Energy said domestic output is likely to fall further, though gains were limited as the overall picture is of a market still heavily supplied.