Publications: The Petroleum Economics Monthly

Where Is the Oil? (April 2015)


This report’s title, “Where is the Oil?,” poses a question that should concern everyone involved in the energy sector. For several months, oil market pundits (economists, analysts, company spokespeople, and government officials) have warned of a developing global crude oil surplus. Early in the year, IEA economists even asserted world storage capacity might be exhausted. Today pundits still suggest we will confront a serious imbalance by year’s end.


The market data do not reflect these views. Since Saint Patrick’s Day, prices have increased as much as thirty-seven percent from their recent lows. Some of the rise can be attributed to passive investor and speculator buying. However, speculation is not the whole story. The sharp contango observed early in 2015 has diminished. The market shift toward backwardation tells us the surplus, if any, is vanishing. The market, in short, says the pundits are wrong.


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