One energy expert says oil could fall to as little as $20 a barrel by the end of the year. That could push gasoline prices back down to $2 a gallon, prices not seen since last fall's slide slammed retail gasoline to its lowest value in four years. Energy experts say oil supply is outstripping demand. Eventually suppliers will tire of paying to store all of the surplus oil and flood the market, they predict.
A year after oil hit a record closing price, the commodity's price is way down -- and may fall significantly further as supply continues to dwarf demand. -Skip- The reasons are simple, said Philip K. Verleger Jr., an expert on energy markets at the University of Calgary in Canada: The still-sputtering economy has lessened demand at a time when there is already a big surplus of oil. For eight straight months, oil supplies have been running about 2 million barrels a day higher than the global demand of 83 million barrels a day, Verleger said. Eventually, he and others predicted, suppliers will tire of paying to store all of the surplus oil and flood the market. "That is the largest and longest continuous glut of supply that I have seen in 30 years of following energy prices," Verleger said. "It's a huge surplus. There has never been anything like it." -Skip- With so much oil available and so little need for that amount, investors, oil companies and even some banks have bought and stored surplus oil everywhere they can. By one estimate, before oil surged to its high this year of $73.38 a barrel in June, as many as 67 supertankers -- each capable of carrying 2 million barrels of oil -- were being used as floating storage. -Skip- But the glut has gone on for so long, he said, that the cost of all of that storage is bound to rise. When it rises enough, some suppliers will refuse to pay and a lot of that oil will be dumped onto the market. "Oil will drop to $20 a barrel by the end of the year because this situation just cannot be sustained," Verleger said.
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The reasons are simple, said Philip K. Verleger Jr., an expert on energy markets at the University of Calgary in Canada: The still-sputtering economy has lessened demand at a time when there is already a big surplus of oil.
For eight straight months, oil supplies have been running about 2 million barrels a day higher than the global demand of 83 million barrels a day, Verleger said. Eventually, he and others predicted, suppliers will tire of paying to store all of the surplus oil and flood the market.
"That is the largest and longest continuous glut of supply that I have seen in 30 years of following energy prices," Verleger said. "It's a huge surplus. There has never been anything like it."
With so much oil available and so little need for that amount, investors, oil companies and even some banks have bought and stored surplus oil everywhere they can. By one estimate, before oil surged to its high this year of $73.38 a barrel in June, as many as 67 supertankers -- each capable of carrying 2 million barrels of oil -- were being used as floating storage.
But the glut has gone on for so long, he said, that the cost of all of that storage is bound to rise. When it rises enough, some suppliers will refuse to pay and a lot of that oil will be dumped onto the market.
"Oil will drop to $20 a barrel by the end of the year because this situation just cannot be sustained," Verleger said.
... that's basically what [Thomas Friedman]'s doing here. The internet is speeding up business communications, and global labor markets are more fluid than ever. Therefore, the moon is made of cheese. That is the rhetorical gist of The World Is Flat. It's brilliant. Only an America-hater could fail to appreciate it.
(h/t Drew) A man of words and not of deeds is like a garden full of weeds; a man of deeds and not of words is like a garden full of turds — Anonymous
Cushing, the place where the WTI is quoted, only has roughly 30mb/d of storage (and it's been full for quite a bit of time). The US Strategic Reserve has about 700 million barrels. In the long run, we're all dead. John Maynard Keynes
