Global supply of crude oil is constantly rising year on year. From around 84.34 million barrels per day in 2009, global oil supply is expected to average around 89.88 by the end of 2013, rising by almost 73,000 bpd compared to 2012. Crude oil supply rose by 2.1% in the year 2012 as compared to 2011. The sharp increase in production numbers was mainly achieved by the US which was the main contributor as the domestic production in the nation reached record highs.
Continued production growth from US tight oil formations and Canadian oil sands have helped the US to reduce its reliance on oil imports. The US is also expected to cut down on imports of crude oil to virtually zero if the pace of shale oil and gas production growth keeps rising and the demand for crude oil continues to slide further in the nation.
On the other hand, global demand is not pretty good. The US, which used to be the top consumer of crude oil, has cut down its oil imports significantly in the recent past. The enduring economic worries in Europe and China’s slowing economic conditions are taking a toll on the demand for crude oil. The pace of China’s oil demand growth appears to be slowing as its economy is struggling with slower growth across sectors.
The ongoing slowdown in developed nations has led to a reduction in the demand for crude oil. Oil demand from OECD countries has declined for the fifth time in the past six years and continues to follow the same trend. The continuing debt crisis in Europe and the struggling economy of the US too have resulted in lower demand for oil.
Crude oil imports from all major economies have shown lower-than-expected growth in the first half of 2013. There are several factors responsible for reduced oil imports from these economies. Major among them could be the slowdown in the overall economic growth. Also, continuous higher domestic oil production across developed economies could be attributed for the same.
The best example could be the US whose domestic oil production has reduced its dependency on oil imports. The US, which is believed to be the net importer of crude oil, recently reported a record high domestic oil production. Oil production in US surpassed imports for the first time since 1997 in the month of June 2013 on the back of rising shale oil plays.
Changes in the demand and supply equation would be felt in the coming weeks as seasonal demand generally ends in the US and Europe by that time. Also, lower-than-expected demand from Asian buyers as well as from the developed economies will further weigh on oil prices. Further, we believe that the bearish fundamentals and the ongoing slowdown in the global economy would pressurize the oil prices in the coming weeks.