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US demand for oil key to price recovery

Despite the waning hype of the OPEC and non-OPEC combined (the ‘OPEC alliance’) production cuts that helped to temporarily bolster the price of oil in the short term, the fact is that supply continues to outstrip demand. The title chart (above) shows the inelastic nature of the crude oil supply and demand market.

In 2016 as supply outstripped demand (and the demand curve slid to the left) the price of oil came down sharply. This year we are seeing the effects of the opposing forces of the ‘OPEC alliance’ cuts and increases in other non-OPEC production, namely US Shale. If the level of supply won’t move, then the only solution left for oil price is for demand to increase. If 2018 delivers a return to increasing demand for oil, then it won’t take long before we see $100 oil again.
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