Stockpiles of Oil and Fuel Accumulate

As China’s economy experiences a slow-down they will consume much less oil for 2012 and 2013. The U.S. government’s Energy Information Administration (EIA) expects the significant stock-piles of oil to relieve global oil markets for the second half of 2012. A consensus of three top energy market forecasters says that the output of crude oil has exceeded the demand significantly creating a ‘comfortable’ global supply of oil. This may mean a bit of relief for consumers that are growing accustomed to exorbitant fuel prices. There may still be worry over the security of the oil supply considering turbulent world affairs, particularly in the Middle East.
Oil Producers Outlook: Negative

A bit of relief at the fuel pumps, it might happen. A sense of security with the ‘comfortable’ supply of crude oil worldwide, it would be good. However it is too soon to ascertain how current world events will affect the overall outcome and the impact that it will have on consumers. For the producers of oil, the International Energy Agency’s (IEA) forecasts a balancing of impact on oil prices due to concerns over political tensions such as the opposing views and tensions between the West and Iran surrounding the Nuclear Program in Tehran. The outlook for oil producers, according to David Hufton, managing director of brokers PVM in London, is not good for companies that will not likely see a rise in share prices.
World Affairs Impact: Pessimistic

A monthly report by the IEA regarding the second half of 2012 states “The geopolitical dimension is likely to continue to provide something of a floor for prices.” The situation between the West and Iran will continue to weigh-in heavily. Overall the supply and demand fundamentals for the market are weak although the global oil production in July was 2.6 million barrels per day (bpd) higher than in July 2011. Forecasters agree that the recent progress made toward restoring output from Iraq, Nigeria, and Libya could be threatened if political and civil tensions intensify.

In June the price per barrel fell below $90 after Saudia Arabia raised production when Iranian exports decreased as a result of Western sanctions. Iranian oil exports fell in July to multi-year record lows but the IEA adds that Iranian oil sales could be sold to major consumers soon. North Sea Brent crude oil prices are now reported at $110 and the recovery is attributed to Iranian tensions and investor’s expectations that new money printing programs from global central markets will commence. The report further predicts that there is potential for Iranian imports to recover moderately beginning in September. The decelerated growth rate and slowed economy will still have an impact as 1 million bpd of Iranian oil may have difficulty finding buyers during the second half of 2012.

How do you think the global stockpiles of oil will affect the world economic markets? Do you foresee any sudden surges in global demand? Please share your thoughts with us.