| By Phil Flynn June 13, 2018 |
While the markets await the outcome from the Fed meeting and oil traders fret about whether OPEC and non-OPEC might raise production, as well as the weekly supply report, the biggest threat to the price of crude oiland the global economy may be the lack of spare oil production capacity. While the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) and the Energy Information Administration (EIA) released reports that show they are confused about the outlook for demand, the truth is that OPEC and Non-OPEC decided to raise oil output, and the amount of oil that the world can bring on quickly will be almost non-existent.
Reuters reports that global spare oil production capacity could fall from more than 3% of global demand now to about 2%, its lowest since at least 1984, if OPEC, Russia and other producers decide to increase output when they meet on June 22-23. Some analysts say spare capacity could even fall below 2%, after years of low oil prices drove down investments in new production across the industry to a historic low. These numbers are very much in line with what we are looking at and it is a situation that we have warned was going to develop for some time.