Crude oil prices have risen by about 40% over the past weeks after falling to a six-year low. Spot prices for Brent for example, were US$62.82 per barrel on 11 May 2015, up from US$46.09 per barrel on 22 January 2015, Energy Information Administration (EIA) data show. While some investors mull over prospects, others consider it the beginning of a sustained price rebound. United States ― mostly shale ― operators, for example, have been gearing to restart operations after idling about 60% of drilling rigs over the past few months. Such optimism however, is not supported by current market fundamentals.
Global oil demand is unlikely to rise significantly in the near term. China, a principal driver for global energy prices is projected to see only a 3.1% rise in fuels demand next year, compared to 11% in 2010, after the 2009 price slump, according to the EIA. The country’s economic growth rate for this year is projected to be the slowest since 2008. Goldman Sachs Group expects the year’s growth in crude oil demand (1.5%) to lag that in supply (1.7%), with an oil balance ― excess of supply over demand ― of +1.2 million barrels per day (MMbpd). Continue reading