Low Oil Prices – How They Got Here & Where They’re Going

In this episode of the Oil and Gas Sound Off Podcast, Joe Perino discusses the current state of low oil prices.

While oil prices have rebounded significantly off of their recent lows of around $27 a barrel, it is worth investigating how we got here and where things are headed.

Joe takes a good fundamental look at the supply and demand balance and offers his thoughts on where things are headed for the rest of 2016 and into 2017.

In this podcast, Joe explores the low oil price situation, and answers the questions:

• How low and for how long?
• Is the worst over?
• Have we seen the bottom for oil prices?
• Where are we now, and where have we come from?

We hope you are enjoying the expertise and insight that Joe brings to our audience, and be sure to drop any comments, questions or feedback into the comment section below.

Of course, our Oil 101 members can also reach out in the discussion forums.

Listen to the Sound Off Oil and Gas Podcast below:

Links:

EIA – Energy Information Agency
OPEC
Oil 101 – a FREE 10-part introduction to the oil and gas industry

Transcript:

Hello, I’m Joe Perino, and welcome to Sound Off. This oil and gas podcast is part of the EKT interactive learning network, and is brought to you by Oil 101.

In this podcast, I want to explore the low oil price situation, and answer the questions:

• How low and for how long?
• Is the worst over?
• Have we seen the bottom for oil prices?
• Where are we now, and where have we come from?

Well, the oil price decline started in late 2014 in the fourth quarter and slid all the way through 2015, dipping under $30 a barrel earlier this year, and I’m now speaking in June of 2016. I believe it bottomed out around $27 a barrel.

Since then, it has rebounded significantly, even topping $50 a barrel just the other day. Now it’s slipped back into the high 40s.

Supply and Demand

Global demand is up approximately 1.8% per year versus a previous growth rate of 1.4%. Supply grew about 2.2%, and now is approximately 97.2 million barrels per day.

That leaves consumption at a little over 95 million barrels per day. Our current oversupply of crude is about 1 1/2 to 2 million barrels a day, and it should be noted that traditionally, once the surplus is down around 1 million barrels a day or less, the pricing situation gets very tight and you’ll see we’ve typically seen that oil price rebound sometimes very quickly.

Russia and Saudia Arabia

Now, on the producing side, Russia and Saudi Arabia are about maxed out, and added production won’t help the price at all from either party. Iran is currently producing about 3.6 million barrels per day and is expected to increase that next year to 3.7 million barrels per day.

Iraq is doing very well, they’re producing around 4.2 million barrels per day, and they actually peaked in January to 4.4, and they have a target of going to 5 million barrels per day in the next 2 years. They want to do as much as 6 million barrels a day by the end of the decade, we should see.

US Production

The US has slipped from about 9.4 million barrels per day to around 9 million barrels per day. The result of low oil price and the shrinking in the rig caught by almost 3 quarters. Now, on the downside, we’ve seen stoppages and problems in Canada due to the fire in Alberta, the problems in Nigeria and Libyan with supply disruptions.

The political chaos in Brazil, which has held up i