EIA reduces its crude oil forecast for 2016 to US$56/ bbl

In its latest Short-Term Energy Outlook, the US EIA has reduced its crude oil forecast for 2016 to US$56/ bbl, US$2/ bbl lower than earlier forecast (last month), keeping the 2015 crude forecast unchanged at US$54/ bbl. On a MoM basis, the US crude production is expected to have declined by about 40,000 barrels per day (bpd) (last month the decline was higher at 120,000bpd). EIA estimates petroleum products consumption to grow by 1.4 million bpd (mbpd) in both 2015 and 2016, primarily driven by higher consumption from China. Simultaneously, the latest OPEC Monthly Oil Market Report estimates global oil demand to grow by 1.50mbpd in 2015 and 1.25mbpd in 2016, driven by demand from Asia particularly emanating from China and India. Although the demand forecasts by EIA and the OPEC remain largely unchanged for 2015 and 2016, the crude price forecast for 2016 is still languishing. It is not only the global demand which would impact the oil price but also other factors such as OECD crude inventories, oil inventories at sea, Iran’s expected entry into global oil market, and slowing growth in China. Overall, in near term, there seems to be no catalyst for the crude oil price to move in either direction, leave aside moving up.