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Page added on October 14, 2018
Oil Demand Is Cooling. Just Don’t Expect Prices to Follow
The world’s two big intergovernmental energy groups have updated their outlooks for the oil market to the end of next year – and they don’t make comfortable reading. High prices, trade wars and weakening currencies are taking their toll on demand growth.
That doesn’t necessarily mean that prices will fall. Concern that there isn’t enough spare production capacity should continue to support oil for a while yet.
Stunted Growth
Oil demand growth forecasts have been trimmed for this year and next and will probably be cut further
Source: OPEC & IEA
Both OPEC and the International Energy Agency, which represents consumer countries, expect global consumption to increase by about 1.36 million barrels a day next year. That’s a lot less than we have become used to since the price crash that began in 2014, and it’s a more pessimistic outlook than either group had back in July.
The changes may not appear big, but there could be more to come. Neil Atkinson, head of the IEA’s oil industry and markets division, said after publication of the report on Friday that any changes to the 2019 demand outlook are more likely to be to the downside than the upside. Both the IEA and Organisation of Petroleum Exporting Countries have a history of being too slow to alter their demand forecasts, which can leave them trailingbehind the market.
It’s not hard to explain Atkinson’s wariness. The report sums it up in four words: “Expensive energy is back.”
It’s not just that crude hit its highest in almost four years earlier this month. For countries like India and China, the main sources of demand growth, the weakening of their local currencies against the dollar has amplified the impact of crude’s rise.
Pumped Up
Retail prices in India have been pushed up by rising crude oil costs and a weakening currency
Source: Bloomberg
Drivers in India were paying record prices for gasoline and diesel earlier this month, even with crude still about 45 percent below its 2008 peak. That surge prompted the Indian government to cut tax on fuels and ask state-run oil marketing companies to absorb additional price cuts. Chinese drivers have also seen prices at the pump rise by 28 percent over the past year.
Lower oil demand growth forecasts also reflect cuts to the outlook for global economic growth made by the Organization for Economic Co-operation and Development and the International Monetary Fund. President Donald Trump’s “America First” policy has seen the U.S. and China slap tit-for-tat tariffs and other measures on a wide range of goods, while verbal attacks on America’s historic friends have raised worries of a broader slowdown in international trade.
All this ought to provide some relief to drivers in the form of lower prices which should, eventually, feed through to the pump. But don’t get too excited just yet. The over-riding concern as we head into winter in the northern hemisphere is the availability of spare oil production capacity to offset any further disruption to supplies. There isn’t much.
Shrinking Flow
Iran’s crude and condensate exports have dropped by 39 percent since April and will fall further before sanctions come into effect on Nov. 4
Source: Bloomberg tanker tracking
Iran’s exports have fallen by 39 percent since Trump announced sanctions on the country. They will come into force on Nov. 4. OPEC and Russia have struggled to offset the drop in Iranian and Venezuelan output – even with Russian output at a post-Soviet high, Saudi Arabia producing near record amounts and Libya pumping more than it has done at any time in the past five years. Libya remains unstable and fellow African producer Nigeria is scheduled to hold elections in February, something that has historically raised tensions in the oil-producing Niger River delta.
The IEA puts OPEC’s spare capacity at 2 million barrels a day. But most of that either hasn’t been tested, or assumes political disputes that are crimping production in some countries will be resolved. Actual capacity immediately available may well be less than half the amount identified by the IEA. That constraint should help to support oil prices until additional supplies become available.
20 Comments on "Oil Demand Is Cooling. Just Don’t Expect Prices to Follow"
makati1 on Sun, 14th Oct 2018 6:36 pm
“Source: OPEC & IEA” (and Bloomberg) WOW! And we are supposed to take what they spew as gospel? LMAO
GetAVasectomyAndLetTheHumanSpecieDie on Sun, 14th Oct 2018 8:57 pm
Is it Oil Demand is Cooling or Oil depletion is accelerating and ending modern society.
I would venture to say that the answer is Oil depletion is accelerating and real volume of oil is down. OPEC and IEA are in the business of preserving the debt pyramid, they are not in the business of telling the Gettruth.
Outcast_Searcher on Sun, 14th Oct 2018 9:29 pm
And given Mak’s track record, are we supposed to believe what he spews? He makes the likes of IEA and Bloomberg look like genius prognosticators.
Get: How many decades should the Cassandras be able to claim an oil depletion calamity is upon us (as they ignore efficiency, technology, etc gains), while the reality says it’s quite a few decades out — and be deemed at all credible?
Given the volatility and unpredictability of the financial markets, including the oil markets, and given how hard it is for 99.99% of us to “beat the markets” over any meaningful length of time — why the pognosticators in general have ANY real credibility is beyond me.
makati1 on Sun, 14th Oct 2018 11:01 pm
Outcast, hypocritical finger pointing again? I point out fact, not fiction, like the oily sites, mentioned above, spew. They have been lying their asses off for at least the last 20 years.
No one knows the real amount of recoverable oil left or when it may be recovered, if ever. Nor do they know what will happen tomorrow. Certainly not what next year, or 20– whatever, will bring.
The whole oily house of cards is going to crash and burn (pun intended). The suckers who believe they can get rich in the markets are fools and will soon be on the street selling apples. Wait and see.
print baby print on Mon, 15th Oct 2018 1:15 am
The situation is very complex. But people in OPEC and IAE are lying. They have to ,not 7bilions of people can survive and the bau must continue as much as possible . Those people have better insight into the situation. People who are predicting peak oil are telling the truth but they are often wrong in their prediction because the information have been hidden from them. WE past the peak of easy conventional oil no doubt . Nowadays oil is tar sand shale oil, bio fuel etc let’s hope the bau will continue because when it stop it want be nice to anyone but in my opinion this time we are very very close to face big problems with oil supply
Davy on Mon, 15th Oct 2018 5:47 am
“India Yet To Figure Out Way To Pay For Iranian Oil Imports”
https://tinyurl.com/ybsh6ts4
“India hasn’t worked out yet a payment system for continued purchases of crude oil from Iran, Subhash Chandra Garg, economic affairs secretary at India’s finance ministry, said on Friday.”
“Recent reports have it that India has discussed ditching the U.S. dollar in its trading of oil with Russia, Venezuela, and Iran, instead settling the trade either in Indian rupees or under a barter agreement. India is Iran’s second-largest single oil customer after China and was expected to cut back on Iranian oil purchases, but it is unlikely to cut off completely the cheap Iranian oil that is suitable for its refineries. India wants to keep importing oil from Iran, because Tehran offers some discounts and incentives for Indian buyers at a time when the Indian government is struggling with higher oil prices and a weakening local currency that additionally weighs on its oil import bill.”
Davy on Mon, 15th Oct 2018 12:44 pm
“Why Crypto Miners Are Paying Attention To The Permian”
https://tinyurl.com/ych4kulj
“Bitcoin miners have become energy hunters, scouring the world for cheap electricity. When most people think about bitcoin mining operations, they imagine hydro-powered warehouses in Canada or the Sichuan Mountains, but what about the oil capital of the United States? What if it were possible to turn otherwise-wasted natural gas into bitcoin?”
“Turning Gas Into Bitcoin Bitcoin’s energy consumption has been covered immensely from every side of the debate. Generally, so the argument goes, bitcoin miners’ carbon footprint is growing exponentially. Though there have been significant efforts made to reduce the environmental toll, from solar farms to hydro-plants, Bitcoin can’t seem to escape this negative stigma. Some of the most interesting initiatives, however, are those literally turning waste into bitcoin. And the oil industry is ripe for potential in this regard. Bernstein analysts led by Jean Ann Salisbury noted that the Permian Basin could produce an “astounding 25 bcfd of wet gas [per day] to 2025, which will mostly be treated as a byproduct based on oil price and possibly even flared! What could producers do instead with this free gas?”
“One company, in particular, is offering a unique plug-and-play solution to this issue. With the understanding that the current path is unsustainable, Flare Mining has built a portable flare gas capture and processing unit which allows drillers to easily turn otherwise wasted gas into bitcoin. The FlarePods come equipped with everything needed to process excess natural gas, turning it into energy to power mining rigs. Additionally, the pods feature a satellite internet connection which will allow drillers even in the most remote locations to remain connected. While the FlarePods provide a glimmer of hope for oil producers looking to cut back on their losses, or even profit on their excess gas, there’s still a long way to go before such solutions become commonplace in land of crude oil cowboys.”
Harquebus on Mon, 15th Oct 2018 3:45 pm
As I have said before, while global debts continue to increase, peak oil deniers do not have a valid case. The oil industry as a whole borrows created currency to survive. It does not seem to be able to operate on profits (surplus energy) alone.
The oil industry can no longer provide the surplus energy required to continue the growth that is needed to pay off the enormous global mountain of debt nor the legacy energy requirements for infrastructure maintenance that growth creates.
Duncan Idaho on Tue, 16th Oct 2018 12:54 pm
“For the first time since 1973, the United States is the world’s largest producer of crude oil.”
Produces 11 million barrels, uses 20 million.
Can you do the math?
Cloggie on Tue, 16th Oct 2018 1:13 pm
@Duncan, if you realize that the US is both the largest consumer AND largest producer, all mysteries are solved.
Cloggie on Tue, 16th Oct 2018 2:02 pm
Holland goes batteries big time:
Dutch Booking.com founder Kees Koolen and others invest 1.6 billion in Chinese lithium-battery plant with Dutch technology:
https://www.rtlz.nl/business/artikel/4452336/bookingcom-kees-koolen-lithium-werks-twente
University of Twente, the Netherlands, and energy company Lithium Werks are to set up a battery campus near the university, that should bring jobs to 2000 people eventually:
https://www.utwente.nl/en/news/!/2018/9/75551/lithium-werks-and-ut-join-forces-in-energy-transition-research
The EU is to invest 200 million euro in battery research:
http://www.spiegel.de/wirtschaft/soziales/batteriespeicher-eu-kommission-will-200-millionen-in-forschung-stecken-a-1233469.html
Goal is to set up a European industry that can take on current Asian dominance on the global battery market (70%).
Cloggie on Tue, 16th Oct 2018 2:37 pm
Royal Dutch Shell to Become Renewable Energy Leader
https://deepresource.wordpress.com/2018/10/16/royal-dutch-shell-to-become-renewable-energy-leader/
I AM THE MOB on Tue, 16th Oct 2018 2:57 pm
“Yes: I am a dreamer. For a dreamer is one who can only find his way by moonlight, and his punishment is that he sees the dawn before the rest of the world.”
― Oscar Wilde
I AM THE MOB on Tue, 16th Oct 2018 2:58 pm
Totalitarianism in power invariably replaces all first-rate talents, regardless of their sympathies, with those crackpots and fools whose lack of intelligence and creativity is still the best guarantee of their loyalty.
-Hannah Arendt
I AM THE MOB on Tue, 16th Oct 2018 3:08 pm
Russia bears no responsibility
https://i.redd.it/unkbaqchyis11.jpg
I AM THE MOB on Tue, 16th Oct 2018 5:39 pm
Voters at a church applaud man after he ends his pro-Trump speech with a Nazi salute
https://i.redd.it/o8cap5ygujs11.gif
Cloggie on Tue, 16th Oct 2018 6:52 pm
Russia bears no responsibility
https://i.redd.it/unkbaqchyis11.jpg
Indeed. Ukraine and Syria:
The US started it,
Russia ended it.
https://documents1940.wordpress.com/2017/11/05/qatar-admits-us-turkey-ksa-qatar-conspired-in-syrian-war/
Now the US finally lost its status as “invincible hegemon”. Even KSA smells blood and threatens the US to “become friends with Iran”.
Fortunately Britain still loves you, you can have it as a private playthingy and pump the place full with third-worlders, together with Brexit champ Farage:
https://www.dailymail.co.uk/news/article-3630847/More-black-people-allowed-Britain-leave-EU-immigration-non-issue-says-Nigel-Farage.html
Cloggie on Tue, 16th Oct 2018 7:04 pm
Voters at a church applaud man after he ends his pro-Trump speech with a Nazi salute
https://i.redd.it/o8cap5ygujs11.gif
Yes, whitey in the US is pretty desperate. It is the only “demographic” on this planet with deteriorating life expectancy.
This little tidbit is of course picked up by the 2 billion fascists in Eurasia, who wonder how this can be exploited to their advantage, against Washington. And after some time a vile grin appears on their 2 billion natzi faces…
https://goo.gl/images/mYSZfg
…realizing that Washington is toast, if this is going to be played-out properly.
How do you prefer your beating millimob: medium or welldone?
Free Speech Message Board on Wed, 17th Oct 2018 12:39 am
The US is collapsing.
Americans say the US debt must be increased because debt worked out so well for Rome.
Americans scream that the US should have wars because the USA needs more refugees.
Americans say tyranny is the American way.
Americans think trade wars are good because Chinese products are too cheap and tariffs will fund US wars, debt, and tyranny while killing US exports.
Americans insist Obama was an asshole for destroying the US with wars, debt, and tyranny, but Trump is a god because he loves wars, debt, and the police state.
Americans are so retarded that they think government overlords should have rent control instead of getting rid of regulations that drive up housing costs.
Americans believe anyone who wears a costume, badge, and a gun is a saint.
Instead of losing weight, Americans think the government should make a decree forcing airlines to provide large seats that will drive up ticket prices.
Americans feel that bankers who committed fraud should receive billion dollar bailouts.
Americans say being a Nazi or being a Communist are the only political options.
Americans insist the only possible way to solve any problem is force.
Americans say the US should build a wall to keep Americans IN because closed borders helped make North Korea rich.
Americans scream war is good because Libertarians oppose wars.
Americans would rather beg for government job-killing decrees that raise the minimum wage instead of starting a business or learning a skill.
Americans believe fighting the British during the Revolutionary War was a huge mistake.
Americans scream that the government spends your money better than you can.
Americans say killing chickens to eat is okay, but eating cats must be illegal.
Americans insist that restaurants would have a vested interest in killing their customers if the government did not require businesses licenses.
Americans fought the Nazis, but have now become Nazis.
Americans are so stupid that they say baseball hats must be outlawed to help the state meet their private prison quotas.
Americans swear government decrees made the USSR successful.
Americans say George Washington was a faggot for supporting freedom.
Americans think the desires of neighbors are more important than the rights of property owners.
Americans believe withdrawing less than $10,000 from your own bank account should be illegal because you might use drugs.
Americans insist protests must be illegal because protesters might break windows.
Americans feel that the government must close newspapers to prevent fake news.
Americans say the government should shut down churches because there might be terrorism.
Americans scream guns must be banned because blacks might buy guns to kill white people.
Americans feel being groped by the TSA is good because they have nothing to hide.
Americans say NSA wiretapping is fine because it is just metadata.
Americans believe forfeiture is okay because the police have been doing it for years.
Americans insist torture is great because other countries do it.
Insanity.
The USA feels like it is committing suicide.
How can Americans sleep at night now or look in a mirror without feeling utterly disgusted and ashamed?
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