Warmer weather helped cut home heating oil consumption by 45 percent in winter 2015/16 compared with the previous year ("Strong El Nino helps reduce U.S. winter heating demand and fuel prices," EIA, April 25).
But with La Nina conditions building up quickly near the coast of Peru, there is a strong likelihood that winter 2016/17 will be cooler and boost fuel demand ("Mini La Nina has emerged in eastern Pacific," Reuters, April 26).
In recent weeks, the global economic outlook has also improved, compared with the gloomy predictions at the turn of the year, which suggests the major economies will avoid recession.
The worst of the commodity-slump-induced shock is now probably past. Provided the global economy continues growing, freight demand should gradually start expanding again, and with it, diesel consumption.
Global oil demand grew by 1.8 million bpd last year, the fastest for more than a decade, outside the immediate post-crisis rebound, and is predicted to grow by another 1.2 million bpd in 2016.
Global oil supply from outside the Persian Gulf and Russia is now falling rapidly and expected to decline at the fastest rate for more than 25 years in 2016.
U.S. oil production has already declined by more than 500,000 bpd between April 2015 and January 2016 and is forecast to fall by a further 960,000 bpd by the end of the year ("Short-Term Energy Outlook," EIA, April 2016).
Non-OPEC supplies overall are forecast to fall by an average of 700,000 bpd in 2016, with the biggest declines in the second half, according to the International Energy Agency ("Oil Market Report," IEA, April 2016).
The two sides of the oil market are now rebalancing rapidly in response to the plunge in prices over the last 20 months.
Like any commodity market, the oil market is forward-looking. Just as it began discounting the emergence of excess supplies in the summer of 2014, it is now discounting the emergence of excess demand in spring 2016.