Crude Surplus Keeps Oil Prices Low

A surplus of crude from new North American sources is keeping the current oil prices low, according to the recent report of the International Energy Agency.

According to the agency, crude from Canada and conventional oil from other sources are transforming oil prices worldwide.

The effect on the per barrel oil prices of those fresh sources will be as important over the coming five years as the increasing demand in China was over the last 15, said the IEA.

The IEA anticipates crude flow from North America to rise daily by 3.9 million barrels between 2012 and 2018. That rate is about fifty percent of the total quantity of expected global output growth – 8.4 million barrels daily in that case.

Globally, the present daily oil consumption is around 90.6 million barrels. Within six years, that daily rate is expected to rise to 96.7 million barrels. However, the forecast of the IEA still sees inventories surpassing that, and the relative excess in supply will probably maintain lower prices, according to the group.

Even OPEC, which tries to maintain prices higher than a particular level by restricting supply, presently finds itself releasing more crude compared to its plans.

A recent report shows that OPEC’s crude output grew by 250,000 barrels a day in April, situating the group at a daily output of 30.5 million barrels daily. That is almost 500,000 million barrels more than the present OPEC goal of 30 million barrels daily.

In New York, the recent cost of the dominant oil contract shed 45 cents to $94.72 per barrel. Crude prices recently rose following U.S. data that showed a rebound in retail spending for the past month.

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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