Cheap Gasoline is Boosting Global Demand

Global oil markets seem to have moved back into balance thanks to strong growth in fuel consumption and a series of large supply disruptions in major crude producing nations.

Motorists’ soaring consumption of cheap gasoline in the United States as well as in some large emerging economies, including India and Mexico, will help boost global oil demand by more than 1.4 million barrels per day in 2016.

Consumption had already risen by 1.8 million bpd in 2015 and is predicted to increase by well over 1.0 million bpd again next year, marking the strongest and most sustained increase in demand since before the financial crisis.

On the supply side, U.S. oil production is expected to fall by 700,000 bpd between 2015 and 2016 as lower prices curb onshore shale drilling.

And a lengthening list of supply disruptions from Libya, Nigeria, Venezuela and Canada among others has grown to more than 3 million bpd.

While stocks of crude and fuels remain unusually high following heavy oversupply in 2014 and 2015 they are no longer increasing.

The shift from oversupply to market balance is evident in the relationship between nearby and deferred futures prices.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza