Global crude oil supplies are at a record 3.0 billion barrels, according to International Energy Agency in what they call an “unprecedented buffer.” This comes the day after oil prices were hit hard after the Energy Information Administration reported crude oil inventories grew by 4.2 million barrels last week driving inventories to 487 million barrels and driving U.S. supply to a near record high. This was led by crude oil imports that rose to 7.377 million barrels a day.
Any sense of bullish optimism seemed to get lost after the American Petroleum Institute blindsided the market with a reported 6. 3 million barrel build in crude oil supply. The number was about 5 times larger than market expectations and came as traders were trying to asses conflicting reports from different reporting agencies and conflicting OPEC comments. In the end though, after the whopping increase in weekly supply, the focus turned to the near term oil glut.
Oil is unlikely to return to $80 a barrel before the end of the decade, despite unprecedented declines in investment, as yearly demand growth struggles to top 1 million barrels per day, the International Energy Agency said on Tuesday.
While OPEC continues to talk tough about oil production, the International Energy Agency is warning that its strategy may backfire on them. This comes the day after the United Arab Emirates Energy Minister Suhail Mohamed al-Mazrouei is saying the UAE plans to double down in the OPEC price war by raising production in the next few years to 3.5 million barrels a day, up from 2.9 million barrels per day. He is predicting that the drop in oil prices is almost over and soon prices will start to rise.
While crude oil prices in the short term are fixed on the Fed and current oversupply, in the big picture it may be time to party like its 1999. In 1999 oil prices had just come off a year (1998) where oil prices had dipped as low as $10.35 per barrel and there was doom and gloom across the energy space. Yet in hindsight oil in 1999 was at a historic turning point and a major bottom that changed the energy landscape for over a decade.