U.S. equities are moving higher today with the Dow, S&P 500, and Nasdaq up over 1 percent led by a strong rally with crude oil following the release of a new report today from the International Energy Agency (IEA) that shows global oil supplies declining in the future with U.S. oil production expected to decline in 2016 and 2017.
U.S. WTI March 2016 futures are trading up 7.46 percent at 31.85.
The IEA report forecasts 4.1 million barrels a day (mb/d) being added to global oil supply between 2015 -2021, a sharp decline from the total growth of 11 mb/d from 2009-2015.
According to the IEA, the drop in oil supply growth comes in response to upstream investment drying up because of the current oil glut that is pressuring crude oil prices.
Global oil exploration and production capital expenditures (capex) are forecast to drop 17 percent in 2016 following a 24 percent decline in 2015.
U.S. oil production output is seen declining 600,000 barrels per day (bpd) in 2016 and by another 200,000 (bpd) in 2017 before oil prices gradually recover, alongside “further improvements in operational efficiencies and cost cutting” that allows oil production to move higher.
The United States and Iran are forecast to lead production gains among non-OPEC and OPEC countries from 2017-2021.
MARKIT – FLASH- Weak U.S. Flash Manufacturing
A new manufacturing flash survey released today from Markit shows U.S. manufacturing PMI dropping to the lowest level since October 2012.
Markit Flash PMI dropped to 51.0 in February from 52.4 in January, the joint (combined) lowest U.S. Manufacturing PMI reading since September 2009.
Factory gate prices declined at the fastest pace since June 2012.
According to Markit, U.S. manufacturing output slowed for the third time in the past four months in February while new business volumes increased only marginally and one of the weakest levels in the past 3 years.
The strong U.S. dollar combined with “less favorable global conditions” held back export sales in February.
Markit chief economist Mark Williamson said in a released statement that prices are falling at the fastest rate since mid-2012 as firms compete to win business.
“U.S. factories are reporting the worst business conditions for over three years. Every indicator from the flash PMI survey, from output, order books and exports to employment, inventories and prices, is flashing a warning light about the health of the manufacturing economy” Williamson said.