The International Energy Agency (IEA) spoke up today and expressed their opinion on the state of oil prices. Referring to oil’s “remarkable recovery” over the last couple weeks, they believe that the market appears to have “bottomed out” and is now headed in the right direction. With a one percent raise Friday, U.S. crude prices jumped to a high for the year, which is great news considering the state of the industry lately. Bombarded with lay-offs, rig shut downs, and more, this is some well received and much anticipated news for most.
It’s quite possible a main contributor to the recent rise in price is the monthly report on global supply/demand published by the IEA this morning. OPEC production is down by 90,000 barrels a day compared to last month, and U.S. production is expected to drop by almost 530,000 barrels a day this year. Yet even though they were optimistic, they also cautioned there is a long way to go before supply and demand find a real balance. Thoughts are we’ll be well into 2017 before that happens.
The IEA isn’t the only one thinking we’re still at least a year out. Goldman Sachs said on Friday that production is unlikely to increase in the U.S. until 2017, and they anticipate the price of oil to be quite unstable for the next few months. They warned that if we get carried away too quickly and ramp production with the rise in oil prices, "we believe a self-defeating rally in oil prices/equities could result."
So once again we continue in our pattern of hurry up and wait. However, it looks as though there is a light at the end of the tunnel. And right now, I think everyone will take a silver lining whenever we can get it!