Publications: Notes at the Margin

Storage, Exports, the Fed, and Global Market Balances (March 9, 2015)


All the subjects we cover in this issue influence the direction of oil prices. Regarding storage, forecasts issued by Argus Media and the Energy Intelligence Group show a global inventory build of more than two million barrels per day in the first quarter of 2015 and 2.5 million barrels per day in the second quarter. Global stocks would rise three hundred million barrels if these forecasts are realized. Regarding US crude oil exports, those who think the "super contango" in WTI would be eased by lifting the ban are incorrect. On interest rates, if the Fed decides to start raising them, it could have an outcome similar to the cycles after World War I, in 1931, and in 1998 where demand for commodities, including oil, dropped sharply. Finally, US gasoline consumption is on the rise with the attendant effect on global oil markets. Even so, the lower fuel prices are saving consumers in the United States money. Much of this gain, however, is being saved rather than spent on other goods and services.


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