Why Did this Drop Happen and How Bad is it vs 2014I'll try to make this as brief as possible. The market absorbed the Non-OPec production growth in 2018 and everyone thought that we would be net short until mid-2019. The Sauds (probably at the behest of the US) and Russians saw an opportunity to make some easy dough. Trump threw everyone a curve and suddenly the market is over-supplied by a million a day. The oversupply IMHO is real becasue the market hs sussed that storage is filling again and hence the pressure on the marginal barrel. The marke also believes, wrongly i believe tht US shale will continue to grow at the same pace.
Its nowhere near as bad as 2014 becuase OECD storage continued to fill until JUne 2016 (before the OPec cuts but we saw lots of shale decline) to a maximum of 3,109 Billion barrels. Per the Opec market report, in October we were at 2,828 Billion barrels right on the five year average. In the October report they indicate that month over month 14.2 Million barels were added.
so the good news is that they have and will cut production to whittle away at this excess. Another piece of good news is that non-OPec will only grow by 1.7 Million bbl/pd.
I'm crossing my fingers and toes that the price drop dampens out soon.