January 22, 2015

Taking a closer look at the global oil supply/demand balance

Global oil prices are at their lowest levels in six years. Supply is up and demand increases are sluggish. According to the International Energy Agency (IEA) oil prices have crashed by 60% since June.

By Melissa C. Lott

Join Our Community of Science Lovers!

This article was published in Scientific American’s former blog network and reflects the views of the author, not necessarily those of Scientific American

In Wednesday's "Visualizing a global price oil crash in three charts" I discussed the IEA's latest oil market report and their analysis of the current supply/demand mismatch. According to this international organization's analysis:

“The price of oil continued to collapse into January as rising supplies collided with weak demand growth and OPEC maintained its commitment to not cut production.”

On supporting science journalism

If you're enjoying this article, consider supporting our award-winning journalism by subscribing. By purchasing a subscription you are helping to ensure the future of impactful stories about the discoveries and ideas shaping our world today.

In the graph shown above, supply (the green line, starting just above the yellow line in 1Q09) and demand (the yellow line) are combined to better illustrate these differences. Furthermore, the solid blue bars show the implied mismatch between supply and demand within that quarter. Negative values - a.k.a. bars that face downward - mean that demand is outstripping supply in these periods. Conversely, the positive values seen since 2013 means that supply has been consistently higher than demand.

Quarter-by-quarter imbalances might not significantly impact global oil prices. However, the long stretch of positive values seen since 2013 shed some light on why global oil prices have plummeted and are expected to stay low in the near term. Noted here is that the IEA assumed that OPEC oil production rates will remain consistent through 2015 in their future projections.

Photo Credit: Graph from the International Energy Agency's Oil Market Report, 16 January 2015

H/T Paul Norton

Subscribe to Support Independent Journalism

Great science journalism requires human expertise, time, effort and creativity. And it costs money. That’s why I and the journalists here at Scientific American hope you’ll join our community.

When you subscribe, you are supporting staff and freelance journalists who are passionate about telling science stories that are true, important and compelling. Our editors and reporters are often experts in their fields, which means they understand the nuances of big discoveries and can untangle the breakthroughs from the hype. With a subscription, you are also supporting rigorous fact-checking to ensure the words we publish are precise and accurate. And you’re supporting original illustrations, graphics and photos that bring you closer to an advanced laboratory, an ice sheet in Antarctica or a space mission in orbit. You’re helping us craft other types of high-quality journalism as well: Our newsletters are carefully written, edited and curated by staffers you have or will come to know and love. Our Science Quickly podcast is based on original reporting, collaboration with editors and scientists and exacting production.

Subscriptions keep this engine running so we can continue to deliver thoughtful, rigorous and independent science journalism to you. In an era of viral misinformation, this work is crucial. If you value what we do, I hope you’ll consider joining us as a subscriber

Thank you,

Jeanna Bryner, Editor in Chief, Scientific American