Oil – What’s going on?

 Investing, Wealth Management  Comments Off on Oil – What’s going on?
Feb 112016
 

This chart is from the Wall Street Journal a couple of days ago. Based on the first chart, it does look like oil demand is slowing down. Probably not a lot but usage may be somewhat lower.

However, the real issue is the increased supply versus demand which is shown on the bottom chart. For several years, demand was growing faster than supply, which is probably why the price per barrel sky rocketed.

Over the last couple of years, shale oil production has changed that relationship significantly. Now that the economic sanctions against Iran have been removed, the potential for additional supply is even greater.

Several central banks have instituted negative interest rates to stimulate their economies. These lower energy prices will likely create some demand to offset the excess supply.

One think I think you can count on is that we won’t have negative gas prices at the pump.

 

Oil Chart from the Wall Street Journal

Oil Chart from the Wall Street Journal