[DantesPeak]

I don't understand how oil demand can fall this year since it is up substantially already in the first half of 2008, unless this is some type of obscure way of saying there will be a depression in the second half of 2008.

[Graeme]

JPM just give % values for the fall, not b/d. So perhaps their forecast is in line with the IEA's recent forecast:

IEA trims world oil demand, cuts supply forecast

$this->bbcode_second_pass_quote('', 'W')orld oil demand will rise at its slowest pace in six years during 2008 as a raft of fuel subsidy cuts in Asia erodes consumption, the International Energy Agency said on Tuesday.

In its monthly Oil Market Report, the IEA said global oil demand will rise by 800,000 barrels per day (bpd) this year, 230,000 bpd less than its previous forecast.


"It's two things. The easing of subsidies is one of the main factors and historical growth in Asia is stronger than we previously estimated," Eagles said.

The report adds to evidence that high oil prices, which hit a record $139.12 on Friday, are slowing oil use. The IEA has more than halved its estimate for demand growth this year from 2.2 million bpd in July 2007.

[Homesteader]

Russian oil export falls 4.2% in Jan.-April, to 81.4 mln tons

17:04 | 20/ 06/ 2008

Print version

MOSCOW, June 20 (RIA Novosti) - Russian crude oil exports fell by 4.2% in the first four months of 2008, year-on-year, to 81.4 million metric tons, the Federal Statistics Agency said on Friday.

Oil production in the reporting period fell 0.3%, to 160.7 million tons, while refining and sales on the domestic market rose 4.5%, to 77.6 million tons.

link: http://en.rian.ru/business/20080620/111460751.html

[DantesPeak]

$this->bbcode_second_pass_quote('Graeme', 'J')PM just give % values for the fall, not b/d. So perhaps their forecast is in line with the IEA's recent forecast:

IEA trims world oil demand, cuts supply forecast

$this->bbcode_second_pass_quote('', 'W')orld oil demand will rise at its slowest pace in six years during 2008 as a raft of fuel subsidy cuts in Asia erodes consumption, the International Energy Agency said on Tuesday.

In its monthly Oil Market Report, the IEA said global oil demand will rise by 800,000 barrels per day (bpd) this year, 230,000 bpd less than its previous forecast.


"It's two things. The easing of subsidies is one of the main factors and historical growth in Asia is stronger than we previously estimated," Eagles said.

The report adds to evidence that high oil prices, which hit a record $139.12 on Friday, are slowing oil use. The IEA has more than halved its estimate for demand growth this year from 2.2 million bpd in July 2007.

[copious.abundance]

$this->bbcode_second_pass_quote('DantesPeak', 'I') don't understand your point. The IEA and everyone else says oil demand will grow in 2008 - just not as fast as 2007.

How can JPM's forecast of falling demand be compared against the IEA's forecast of rising demand?

[Graeme]

Yes, JPM's forecast was at first for me unclear and confusing because they do not quote demand in bpd and compare that with the previous year like the IEA did. So we should perhaps take JPM's forecast at face value and conclude that they predict a fall in demand unlike everyone else. I stand corrected but I don't know how they came to their conclusion of falling demand.

[slickoil]

I've seen the JPM report. They are not commodity analysts but economists. However they make a simple and convincing argument that should be taken in line with the IEA's estimates, I think. Essentially, they show that a simple regression model of oil demand growth (percent change in avg bbls per day) explains 85% of the variation in oil demand growth since 1968. The model includes growth in global GDP and the percent change in the spot price of oil. For 2008, the economists note that global GDP growth is projected to slow considerably from a strong, above trend pace of 3.5% in 2007 to a below trend pace of 2.6%. Combined with the 70%(!!) rise in WTI since 2007 (assuming WTI stays are $135/bbl from now through 2009), this model suggests oil demand will contract in 2008 and again (but by less) in 2009. Although oil demand through May has been strong, GDP growth did not slow until 2Q and the the price of oil did not surge until 2Q, so it still seem very plausible for oil demand to contract. It is basic economics, activity slows and price price goes up....demand for oil goes down. The model forecasted almost every move in oil demand over the past 40 years....hard to see whats changed. If anything, the removal of subsidies in emerging markets (e.g. China, Malaysia, India, Indonesia, etc), will only amplify the demand destruction.