More central to most energy outlooks, though, are questions about demand growth. “First and foremost [is] the pace of growth of the global economy, primarily what happens with the emerging market economies,” says Dominick Chirichella, founder of the Energy Management Institute. China and other emerging market countries have been the main oil demand growth engines of the world and the developed world has become less significant, he adds.
Asian and developing world demand is crucial to the energy outlook, Cooper says. “The U.S. probably has a slight positive but not enough. So, fundamental factors on the demand side really continue to center on China, Brazil, India and other emerging markets,” he says. “To get bullish, you need to see those guys up their petroleum consumption because I don’t think it’s going to come from the OECD.”
Increasing supply, particularly from the United States, also is a growing factor in forecasts, as the International Energy Agency recently predicted the that U.S. crude oil output would surpass that of Saudi Arabia by 2025 (see “Big dog,” below).
“Gasoline and heating oil are very well supplied,” Cooper says. “We’ve actually become a net exporter of both finished gasoline and distillate to the tune of [more than] 300,000 barrels a day of gasoline and [more than] a million gallons a day of distillate.”
While the oil market remains a global market, he notes that if more gasoline or diesel is needed domestically in the United States, it could be arranged “very, very quickly and very, very easily just by suspending exports.”
With U.S. oil production expected to continue to rise because of output from shale formations, the U.S. may become nearly self-sufficient in energy production, notes Zarembski. This, he adds, could create a two-tier market for oil prices as is seen currently between WTI and Brent futures prices. “This especially will be true if the U.S. is not allowed to be an exporter of oil in the near future,” he adds.
The increasing supply has had the effect of keeping WTI prices below $100 per barrel and, if this success from the exploration and production side of the business continues, the robust supply from the United States will help to dampen some of the risk factors that are always present in the global oil complex, says Chirichella.