Potential for Future Oil Price Recovery

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Production levels across the globe have begun to steadily decline as the supply glut continues, and certain experts believe that this is an indication that there will be at least a slight recovery in the price of oil. The ever-increasing global demand for oil is soon going to be greater than the presently-decreasing supply of oil.

Last week, discussions at IHS CERAWeek revealed that many experts, including Adam Sieminski, the head of the EIA, believe that the global demand for oil is still growing despite this supply glut. This will create a disparity between the supply of and demand for oil, which should boost the price of oil in the near future.

Sieminski, in regards to oil reaching at least $40 said, “I don’t think we’re that far away from it.” Sieminski and others believe that oil production in the US and abroad will jump in order to balance the gap between supply and demand. Sieminski also commented on the fact that oil production has been decreasing ever since its peak in April, which has led to a massive drop in the amount of US-produced oil.

David Pursell, of Tudor, Pickering, Holt & Co., agrees with Sieminski, and believes that the production levels of oil in the US have not been resilient, as others have said, but have simply taken a while to decrease. “You’re entering ’17 with an environment that continues to show production declines,” he says. The continually decreasing supply will eventually be surpassed by the demand for oil, and that would certainly create an environment for the oil price to rise.

Article written by HEI contributor Timothy McNally.

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