From Professor Hamilton at Econbrowser: Trends in oil supply and demand. A few excerpts:
The new supplies from the U.S., Iraq, and Iran brought prices down dramatically. And in response, demand has been climbing back up. U.S. consumption over the last 12 months was 800,000 b/d higher than in 2013, a 4% increase. Vehicle miles traveled in the U.S. are up 6% over the last two years.
Low prices are increasing demand and will also dramatically reduce supply. The EIA is estimating that U.S. production from shale formations is down almost a million barrels a day from last year.
These factors all contributed to a rebound in the price of oil, which traded below $30/barrel at the start of this year but is now back close to $50.
Nevertheless, I doubt that $50 is high enough to reverse the decline in U.S. shale production. Nor is the slashing that we’ve seen in longer-term oil-producing projects about to be undone. And while there is enough geopolitical stability at the moment in places like Iraq and Iran to sustain significantly higher levels of production than we saw in 2013, there is no shortage of news elsewhere in the world that could develop into important new disruptions. For example, conflict in Nigeria may cut that country’s oil production by a million barrels a day.
Adding a million barrels/day to U.S. oil demand and subtracting 2 million b/d from U.S. and Nigerian supply would seem to go a long way toward erasing that glut in oil supply that we’ve been hearing about.