While most people are focused on the current glut of crude oil, soon we will start to focus on production destruction. The International Energy Agency (IEA) was, in the beginning of the year, warning that the globe would be producing so much oil that we would have no place to put. But now, they are talking about the biggest production destruction in more than 20 years.
The EIA reported that oil production outside the Organization of Petroleum Exporting Countries (OPEC) will fall by 500,000 barrels a day to 57.7 million in 2016. Most of that will be due to a drop in shale output, but also bedue to a record amount of cap x cuts and the inability of producers to raise capital to fund current and future production.
THE EIA also is saying that they underestimated demand once again, adding that fuel demand will be the strongest since 2010. While they still fret about the potential for weakening demand and worries about the return of Iranian oil, if you compare this report to their earlier reports this is a lot more bullish, despite their bearish spin.
The IEA says basically that Saudi Arabia is winning the price war because their flood market strategy "appears to be having the intended effect." They also think that as other producers pull back then OPEC will raise production further, assuming that they have the spare capacity and assuming that the IEA is not underestimating demand yet again.
Today we remember the evil attack on the World Trade Center. Remember the fallen in your prayers and pray for the military that sacrifice so much to protect us.