The Brent price dipped below the $65 per barrel mark yesterday, while WTI is now trading only just over $60 per barrel. Oil prices are thus failing to profit from the fact that the International Energy Agency revised the demand forecast significantly upwards by just shy of 300,000 barrels per day. The IEA now envisages growth of 1.4 million barrels per day in 2015, which would be twice as much as last year.
Non-OPEC supply was also increased by 200,000 barrels per day by the IEA, however, primarily as a result of the latest upward revision of US oil production. The annual average call on OPEC has thus been increased only slightly to 29.4 million barrels per day. On the basis of OPEC's current output of 31.3 million barrels per day, this would lead to an oversupply of just short of 2 million barrels per day, according to Commerzbank. The call on OPEC in the second half of the year is still approx. 1 million barrels per day below the current level of OPEC production.
The increase in oil prices in recent weeks was mainly due to the expectation that the oversupply would decline noticeably in the second six months of the year, says Commerzbank. For this to happen, demand would therefore have to pick up considerably more sharply. That said, Saudi Arabia has announced that it would further step up its production if this were the case. In other words, the only way for the market to tighten is if non-OPEC supply were reduced, adds Commerzbank. The key factor will therefore be whether US oil production begins falling as anticipated by the US Energy Information Administration. If not, the ongoing oversupply is likely to continue weighing on prices in the second half year too.
