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Originally Posted by _______
I have posted so many times trying to correct this meme that will not die about weak demand causing the drop in oil that I should just give up.
But...one more time.
The world will use more oil in 2016 than it did in 2015. Just as it used more oil while prices dropped throughout 2015 than it did in 2014. The issue isn't demand. It has never been demand.
You can blame pricing weakness on the success of American capitalism capsizing cartel pricing. Smart guys figured out technologies (fracking and horizontal drilling) to extract oil from shale. We have a legal system where mineral rights are held privately and can be sold or leased by the owner. The result of that is the US now has the largest reserves of recoverable oil in the world.
My bet (no one should pay attention to this as no one here has been more wrong about oil than me) is that prices will be near $60 next January.
The late summer downturn in prices is cyclical.
I can be very wrong about the direction of prices. But the fact of growing demand is irrefutable.
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I get that the overall demand for oil has been rising, but it did take a brief downturn in 2008/2009 during the Great Recession. IMHO, the global economy is running on fumes as the Central Banks are out of ammo, and a great deflationary event is coming soon. Contrary to the media spin and .GOV's insistence that the economy is doing great, there are plenty of numbers indicating that not everything is rosy.
Since consumption numbers lag behind production and supply, a drop in demand won't be apparent until well after it's underway. Maybe the low prices are completely due to overproduction or the late summer cycle, but with all the uncertainty in the economy persisting, I think demand is dropping off too.
One thing I did see while driving through eastern Montana and North Dakota (the Williston Basin), were plenty of idle oil pumps. Waiting for higher prices I guess, assuming it's not a fracked out dry well.
I would bet that oil will drop back down to low/mid 30s before heading back up again. There will come a day, perhaps in three to five years, that oil will head north of $100 and may never see double digits again.....
