The face of 'ugly?' Oil 2016The face of 'ugly?' Oil 2016https://www.recenter.tamu.edu/news/newstalk-texas/?Item=127232016-04-05T05:00:00Z2016-04-05T19:50:00Z

​​​​​UNITED STATES - If you were hoping that the continuous decline in U.S. oil and gas rig counts meant that the correction in the oversupply problem in energy would begin this year, think again, according to a new report from Morningstar Inc.

"The magnitude of the current oversupply is such that global stockpiles will continue growing through mid-2017 in all but the most optimistic scenarios," wrote analyst David Meats in the report.

"Our mid-cycle per-barrel price outlook remains at $70 Brent and $64 West Texas Intermediate," wrote Meats. "But near-term prices could remain ugly or deteriorate further."

Meats cited such geopolitical developments as producing countries like Saudi Arabia and Russia agreeing to freeze production at January 2016 levels to help realign supply and demand as an explanation for the slight market rebound in March.

West Texas Intermediate prices reached a four-month high of $41.45 a barrel on March 22, only to fall by 7.6 percent as of March 29.

"U.S. output is likely to decline this year due to heavily reduced capital spending. Consequently, while global demand is expected to grow by around 1.2 million barrels per day in 2016, global supply is expected to remain fairly flat, and it won't grow in 2017, either, if oil prices average less than $50 per barrel this year as expected," Meats wrote.

Gas tells a similar story but has some relief in store thanks to liquefied natural gas exports, according to the Morningstar report.

Houston Business Journal
Houston-The Woodlands-Sugar Land
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