Crude oil prices down sharply in fourth quarter of 2014

Energy Information Administration ^ | JANUARY 6, 2015 | Energy Information Administration

[thackney]

Crude oil prices fell sharply in the fourth quarter of 2014 as robust global production exceeded demand. After reaching monthly peaks of $112 per barrel (bbl) and $105/bbl in June, crude oil benchmarks Brent and West Texas Intermediate (WTI) fell to $62/bbl and $59/bbl in December, respectively.

Brent prices fell below the five-year average in early September and slipped well below the five-year range in November and December. WTI prices have been below the five-year average since early October and below the five year-range since early November.

U.S. highlights

- Domestic crude oil production increased 1.2 million barrels per day (bbl/d) in 2014, up 16% from 2013. At 8.6 million bbl/d, U.S. production is at the highest level in nearly 30 years.

- The Brent-WTI spread averaged less than $6/bbl, significantly lower than the 2011-13 average of nearly $15/bbl.

Global highlights

- Estimated global liquids production grew by 1.8 million bbl/d to total 92.0 million bbl/d in 2014, mainly reflecting non-OPEC (Organization of the Petroleum Exporting Countries) production increases concentrated in North America.

- EIA estimates that global unplanned supply disruptions averaged 3.1 million bbl/d in 2014, 0.4 million bbl/d higher than the previous year. OPEC producers had the largest share of outages at 2.5 million bbl/d.

- EIA estimates that global liquid fuels production exceeded consumption in each of the four quarters of 2014. In the previous five years, production had not exceeded consumption for more than two consecutive quarters.

[thackney]

Not much new news here, I posted this article mainly for the first graph. It shows the discount of US oil, WTI priced in Midland, compared to Brent, a comparable light sweet oil from the North Sea and traded globally, has mostly ended. WTI was discounted due to more supply coming into Cushing, Oklahoma than could easily be transported out to refineries. More had to go on more expensive rail/road and drove the prices down in that area.

[allendale]

The real reason for the drop in oil prices and other commodities is that there is a worldwide economic slowdown. China sits on the granddaddy of all real estate bubbles. They have squandered over a trillion dollars of capital building non productive and deteriorating edifices. their economy is suffering the consequences. The American paper recovery has a foundation of printed and borrowed money. There is no real wealth being produced and the American standard of living is declining. The US has over $80 trillion of unfunded liabilities. Europe is stagnant and chronically consumes more than it produces. Japan is geriatric. Russia is currently suffering but ironically the Russian people have experienced far worse degradations and still have faith in their huge country with immense natural resources. The Mideast is chaotic. Africa remains a basket case. The demand for oil and other commodities will not increase soon.

[umgud]

I wish crude would have come down a bit without crashing so low. I’m not sure of the level, but I’m sure there is a sweet spot.

[thackney]

The real reason for the drop in oil prices and other commodities is that there is a worldwide economic slowdown.

Half the reason, but also the Oil Supply growth mostly from the US and lesser from Canada. It is the reason petroleum commodities have dropped far more than others.

[allendale]

There is no greater force than robust demand to stabilize or boost prices. It is true that the fracking technology caused an market altering jolt but if worldwide consumption continued to increase 2-3% per year, there would have been a very rapid correction. Demand for almost all commodities are down. BTW love your posts and graphs.