Is Oil Heading towards a New Year Low?

During last month, the price of United States Oil (USO) declined by nearly 4.5%, while the price of oil (WTI) fell by 5.5%. Brent oil also fell by over 8.8% in the past month. Let’s examine some of the latest developments related to the oil market and see if oil is heading towards a new low.

Due to the sharper fall in the price of Brent oil, the spread between Brent and WTI contracted in the past few weeks.

The ongoing rise in U.S oil production is among the factors bringing down the price of oil in the U.S.

U.S oil production is slowly rising

The U.S oil market continues to see a slow rise in oil production, as indicated in the chart below.

The slow gain in oil production is likely to reduce the U.S’s dependence on foreign oil, which may maintain a gap between Brent and WTI in the years to come. This year, the EIA estimate the total production will rise to 8.53 million bbl per day – a 14% annual gain. In 2015, oil production may rise to 9.53 million bbl per day, which is another 12% gain, year over year. The expected demand for oil in 2014 and 2015 is at 18.92 million bbl per day and 19.08 million bbl per day, respectively.  This means, the U.S oil production could deliver 45% of the U.S fuels demand by 2015.

The rest of this analysis is at Seeking Alpha

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