A Bullish Outlook For Oil Investors

Summary

• While crude prices have been volatile in recent months, data continues to support the view that the market is firming up.
• Right now, investors are acting very pessimistic, when in fact the picture suggests things should improve further later this year.
• Add to this unexpected events that may or may not (but are likely to) transpire, and this could be the start of something really bullish.
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Even though crude prices have been falling recently, with investors racked by fears regarding global growth and rising US output, new data coming out suggests that any real degree of pessimism is misplaced. Thanks to a new report, courtesy of the EIA (Energy Information Administration), it is looking a lot more like this year will result in a global oil deficit and, next year, while leaning toward a surplus, will not be so bad as to warrant a downturn in prices. If anything, when all of the data is taken together, it looks more and more like investors in this space should be bullish, not bearish, because in any scenario where the global economy does not weaken, crude prices should likely rise from here as inventory levels, at worst, stay nearly flat, and at best, decline some moving forward.

A look at production

In the table below, you can see some production and consumption data I collected from the EIA's Short-Term Energy Outlook. The current forecasted data for each category covers the most recent info available, while the prior forecasted data covers what the EIA reported a month ago. What you can see by looking at this is that, if its estimates are correct, global oil production will continue rising this year and next, but the amount of output globally on a daily basis will be lower than anticipated in April.

Created by Author

For instance, global supply this year should come out to around 101.11 million barrels per day, up 0.44 million barrels per day compared to 2018, but down 0.41 million barrels per day from the 101.52 million barrels per day previously forecasted. In short, for this year, the amount of oil production growth forecasted has been cut by nearly half in just one month's time. This will carry over into next year, it seems, with output

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.