While oil consumption is on the rise, global oil demand will not keep up with increasing supplies, potentially keeping a lid on any gains in the oil market and related exchange traded funds.
After a surging through April, the oil market has been stuck in sideways trading, with the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, up 1.1% and United States Brent Oil Fund (NYSEArca: BNO) down 1.1% over the past month.
WTI crude oil futures rose 2.2% over the past month and is trading around $60.6 per barrel. Brent crude oil futures were up 0.3% over the past month and is trading around $65.1 per barrel.
According to the International Energy Agency, cheaper oil prices and expanding economies have contributed to increased energy consumption across the globe, with demand expected to rise 1.4 million barrels per day this year, compared to previous projections of a 300,000 barrel increase, to a daily average of 94 million barrels in 2015, the Wall Street Journal reports.
For instance, in the U.S., the IEA pointed out that “increased willingness of U.S. drivers to put additional ‘miles on the clock’ helped raise gasoline demand by 4.2% as Americans vehicle miles traveled 3.9% more in the first quarter. Additionally, the agency believed the rising consumer confidence in China would also add to the country’s oil demand.
On the other hand, the IEA warned that in May the supply of oil from the Organization of Petroleum Exporting Countries, or OPEC, hit 31.33 million barrels per day, the highest level since August 2012, reports Holly Ellyatt for CNBC.
“Demand growth alone, however remarkable, could not have been the only source of oil price support, dwarfed as it was by a surge in global liquid supply,” according to the International Energy Agency, the Financial Times reports.