Sunday, December 21, 2014

Is The Oil Glut A Myth -- Zeits -- Seeking Alpha -- December 21, 2014

Over at SeekingAlpha, the article summary and lede:
  • The severity of the oil price drop appears to be in disconnect from some “supply glut” indicators that remain at moderate levels.
  • The price decline does not appear to be caused by an inventory pile up throughout the delivery and storage chain but rather by the lack of supply or demand elasticity.
  • The current imbalance between supply and demand appears to be much “softer” than in the 2008-2009 correction and may be easier to address.
The phrase "oil glut," as it relates to the current situation in the market, has been used by financial and general interest media in the past two months so frequently that one may get an impression that it represents a generally accepted explanation of the recent oil price collapse. At a closer examination, one might discover that the term conveys a somewhat distorted picture of the current dynamics in the oil market.
This is very much in agreement with what Saudi spokesmen seemed to have been saying all along. I assume if Saudi wishes to create a glut, all they have to do is increase production, and then we can really watch the price of oil fall.

No comments:

Post a Comment