Crude Oil (NYMEX:CLU14) prices are mostly lower ahead of this morning’s EIA oil inventory snapshot.
Last night the API released their oil inventory report which was mixed with a slight bias to the bearish side (see below for a more detailed discussion). The market was hit with a strong round of selling on Tuesday after the IEA lowered their oil demand growth forecast for the rest of this year and for 2015. Supply is continuing to outstrip demand.
In addition supply growth is offsetting the existing geopolitical disruptions as well as keeping the market relaxed that there is still ample supply in the event of a new geopolitical supply disruption.
Yesterday afternoon the Energy Information Administration (EIA) also released their latest Short Term Energy Outlook (STEO). In addition to holding their global oil demand growth forecast they reported that July US crude oil production hit the highest level since 1987. The EIA forecast is biased to the bearish side. Following are some of the main highlights of the report.
• U.S. total crude oil production averaged an estimated 8.5 million barrels per day (bbl/d) in July, the highest monthly level of production since April 1987. U.S. total crude oil production, which averaged 7.5 million bbl/d in 2013, is expected to average 8.5 million bbl/d in 2014 and 9.3 million bbl/d in 2015. The 2015 forecast represents the highest annual average level of oil production since 1972. Natural gas plant liquids production increases from an average of 2.6 million bbl/d in 2013 to 3.1 million bbl/d in 2015. The growth in domestic production has contributed to a significant decline in petroleum imports. The share of total U.S. petroleum and other liquids consumption met by net imports fell from 60% in 2005 to an average of 33% in 2013. EIA expects the net import share to decline to 22% in 2015, which would be the lowest level since 1970.
• The growth in domestic production has contributed to a significant decline in petroleum imports. The share of total U.S. liquid fuels consumption met by net imports fell from 60% in 2005 to an average of 33% in 2013. EIA expects the net import share to decline to 22% in 2015, which would be the lowest level since 1970.
• EIA's world oil balance is virtually unchanged from last month's STEO. EIA still expects the balance to remain relatively tight, with surplus crude oil production capacity averaging 2.1 million bbl/d in 2014 and 2.7 million bbl/d in 2015. Global unplanned supply disruptions remain at an elevated level and averaged 3.2 million bbl/d in July, of which Libya accounted for more than one-third. Libya's outages declined slightly in July, but Libya continues to experience swings in its production. Most of Iraq's northern production (outside of the Kurdistan area) remains offline, while Iraq's southern production and export volumes continue to be unaffected despite the ongoing unrest in northern and western Iraq.