The market realities of a oil as a not-so-scarce resource
The supply (scarce) and demand (enormous) equation for oil has made nations, companies and individuals extremely rich over the past 100 years. This past few years, as demand has softened and the supply side strengthen, the new normal is analysts and investors alike hoping for things like “supply disruptions” and halting of “capital infrastructure projects”. Sounds a bit like desperation.
Demand growth is slowing from its lofty levels earlier this year, dashing hopes that the supply will get soaked up quickly.But the real story is the supply outlook. There’s little cause for optimism here, at least in the short term. There was a ray of hope when unexpected supply disruptions over the spring and early summer of this year, most notably in Canada and Nigeria, pushed up prices.
Though there’s is no end in sight to Nigeria’s problems, Canadian production has been all but fully restored. And we’re still seeing additional supplies from projects that were sanctioned in an era of much higher prices — including some from the days when oil prices were even lower than they are now. ENI expects production from the troubled Kashagan field in Kazakhstan, where a final investment decision was taken in 2004, to begin by the end of the year.
The glut persists.
Source: This Oil Glut’s Days Are Numbered – Bloomberg Gadfly
