Global crude oil prices have risen by more than 75% from near twelve-year lows reached in January. The recent spike was driven largely by unscheduled supply outages in major oil-producing centers including Canada, Ghana and Nigeria. Given the sustained, significant oil imbalance (the excess of supply over demand), the outages were seen by not a few traders as a major step towards a long-awaited, supply re-balancing.
Estimates of the total oil supply reduction due to the outages including other withdrawals year-to-date, stood at about 2.5 million barrels per day, bpd, just a few days ago. Not discounting the recent price spike, such rapid supply withdrawal ordinarily would have generated a global price shock. The rather tepid market response was perhaps informative.
Quite a few analysts believe an oil supply re-balancing is imminent, if not in progress already. Such sentiment however is not altogether consistent with extant market fundamentals.
While the global oil imbalance has declined somewhat ― having fallen to 1.34 MMbpd in 1Q 2016 from 1.75 MMbpd in 4Q 2015 ― that decline was not driven by a growth in demand. According to recent data from International Energy Agency, IEA, global oil demand fell consecutively from 3Q 2015 through 1Q 2016, for a total decline of 660,000 bpd.