Demand Surprises
While oil traders talk about the current oil glut, oil and gas demand continues to surprise to the upside. The latest surprise comes from the International Energy Agency, which once again says that they are being caught by surprise by stronger-than-expected demand. In fact so much so the IEA has gone from predicting that we would be producing so much oil that we would run out of places to put it to now predicting that the oil markets might not only tighten next year but actually outstrip demand. The IEA's Matt Perry, reportedly said that "U.S. gasoline demand has taken us by surprise and is set to rise 3% in 2015. Demand response always moves quicker than supply because there is always a lead time for any additional supply to reach the market..." He said that oil markets will tighten in 2016 and demand could even outstrip supply by the end of next year. He said that rising global demand and lower output in North America and Venezuela should subside the current crude glut.
We will get an idea today on whether or not we are seeing U.S. output drop when the Energy Information Administration releases its "Short Term Energy Outlook". Many will be watching to see just how much they decide to lower U.S. oil production numbers. If the EIA lowers output below 9 million barrels a day, look for oil to soar.
The International Energy Agency, is also warning that China should work with them to coordinate using oil stockpiles in the event of a crisis. IEA Chief Fatih Birol said that "China is the most important player in the global energy market" and should become "a full participant" in the IEA's work to secure supplies. "Simply having oil reserves is not enough," Mr. Birol said at the Chinese Academy of Social Sciences, according to a text of his speech. "If they are to be effective in dealing with a global supply disruption, there needs to be some mechanism for their coordinated release. We must make room for China under the IEA umbrella". We also get the API tonight. The Market is pricing in a build of about 300,000 barrels.