The Balance Between Crude Oil Supply And Demand

The Balance Between Crude Oil Supply And Demand by Causeway Capital Management

Executive Summary: The Current Supply/demand Imbalance

From peak to trough, crude oil prices plunged about 60% in 2014 – and slid again recently, testing lows of earlier this year. Excess supply, combined with a market expectation for softening global demand, has weighed on oil prices. Unlike past behavior, the Organization of the Petroleum Exporting Countries (OPEC) has not cut production to support the market price. This appears to us as a rational strategy. The resulting lower crude oil prices should spur demand and constrain uneconomic supply. We currently expect that the self-correcting mechanism inherent in the crude oil markets will likely bring about a recovery in oil...