https://www.iea.org/reports/oil-market-report-december-2023
Read it carefully, but keep in mind that IEA is based in France and the people that sign their paychecks want their monthly reports to show progress toward the Green Agenda.
IEA has a long history of under-stating oil demand growth in future years. They've had to increase their forecast of 2023 oil demand growth three times this year.
IEA's new forecast for 2024 is oil demand growth of 1.1 million barrels per day, which is half of what OPEC is forecasting.
IEA Oil Market Report - Dec 14
IEA Oil Market Report - Dec 14
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: IEA Oil Market Report - Dec 14
As I pointed out in my last podcast, there was a HUGE decline in global petroleum inventories in Q3; over 250 million barrels.
From today's IEA report: "Global observed oil inventories declined by 19.6 mb in October. While crude oil inventories were largely unchanged, oil product stocks fell for the first time in four months, reversing the trend in 3Q23 when oil product stocks rose 1.3 mb/d, while crude drew 1.6 mb/d on average. OECD and non-OECD on-land stocks fell by 18.9 mb and 24.2 mb, respectively, while oil on water built by 23.5 mb."
U.S. and OECD petroleum inventories are BELOW NORMAL FOR THIS TIME OF YEAR. < See yesterday's EIA report.
MY TAKE: IEA's supply /demand forecasts tell us one thing, but falling petroleum inventories tell me that the global oil market remains tight.
From today's IEA report: "Global observed oil inventories declined by 19.6 mb in October. While crude oil inventories were largely unchanged, oil product stocks fell for the first time in four months, reversing the trend in 3Q23 when oil product stocks rose 1.3 mb/d, while crude drew 1.6 mb/d on average. OECD and non-OECD on-land stocks fell by 18.9 mb and 24.2 mb, respectively, while oil on water built by 23.5 mb."
U.S. and OECD petroleum inventories are BELOW NORMAL FOR THIS TIME OF YEAR. < See yesterday's EIA report.
MY TAKE: IEA's supply /demand forecasts tell us one thing, but falling petroleum inventories tell me that the global oil market remains tight.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: IEA Oil Market Report - Dec 14
Fear of the Fed (continued interest rate increases) seems to have faded, but Fear of Recession still linger. Fear of Recession seems to be much higher in Europe, thanks in part to their failed energy policies.
"Evidence of a slowdown in oil demand is mounting, with the pace of expansion set to ease from 2.8 mb/d y-o-y in 3Q23 to 1.9 mb/d in 4Q23. A deterioration in the macroeconomic outlook led to a downward revision in our global oil consumption growth forecast of nearly 400 kb/d in the final three months of the year. Europe, Russia and the Middle East account for most of the adjustment. The impact of higher interest rates is feeding through to the real economy while petrochemical activity shifts increasingly to China, undermining growth elsewhere. Europe is particularly soft amid the continent’s broad manufacturing and industrial slump. In addition, tighter efficiency standards and an expanding electric vehicle fleet continue to curb oil use. As a result, world oil demand growth in 2023 has been adjusted lower by 90 kb/d from last month’s Report to 2.3 mb/d. China accounts for 78% of this year’s increase. Oil consumption growth is expected to ease significantly in 2024, to 1.1 mb/d, with demand baselines normalising as Covid-related distortions fade.
The shift in global oil supply from key producers in the Middle East to the United States and other Atlantic Basin countries, and the dominant impact of China and its booming petrochemical sector on oil demand, are profoundly impacting global oil trade. East of Suez markets have already absorbed the majority of Russian flows following the invasion of Ukraine as well as rising Iranian exports, but now must adjust to increasing volumes of Atlantic Basin crude and NGLs. The continued rise in output and slowing demand growth will complicate efforts by key producers to defend their market share and maintain elevated oil prices."
Conclusion: Despite all the Gloom & Doom macroeconomic noise, IEA expects demand for oil-based products to increase by 1.1 million barrels per day from 2023 to 2024. I will be updating my forecast/valuation models based on 2024 prices averaging $80/bbl for WTI (down $10/bbl) and $3.25/MMBtu for HH ngas. I do expect oil prices to remain in the $70s for Q1, then rise as the Fear of Recession fades in the spring. Demand for transportation fuels always increases as summer approaches. U.S. natural gas prices will need some help from the weather, but if LNG exports stay near capacity (14 Bcfpd) natural gas storage levels should normalize. Just a normal January should wipe out the surplus to the previous year's inventories within six weeks.
"Evidence of a slowdown in oil demand is mounting, with the pace of expansion set to ease from 2.8 mb/d y-o-y in 3Q23 to 1.9 mb/d in 4Q23. A deterioration in the macroeconomic outlook led to a downward revision in our global oil consumption growth forecast of nearly 400 kb/d in the final three months of the year. Europe, Russia and the Middle East account for most of the adjustment. The impact of higher interest rates is feeding through to the real economy while petrochemical activity shifts increasingly to China, undermining growth elsewhere. Europe is particularly soft amid the continent’s broad manufacturing and industrial slump. In addition, tighter efficiency standards and an expanding electric vehicle fleet continue to curb oil use. As a result, world oil demand growth in 2023 has been adjusted lower by 90 kb/d from last month’s Report to 2.3 mb/d. China accounts for 78% of this year’s increase. Oil consumption growth is expected to ease significantly in 2024, to 1.1 mb/d, with demand baselines normalising as Covid-related distortions fade.
The shift in global oil supply from key producers in the Middle East to the United States and other Atlantic Basin countries, and the dominant impact of China and its booming petrochemical sector on oil demand, are profoundly impacting global oil trade. East of Suez markets have already absorbed the majority of Russian flows following the invasion of Ukraine as well as rising Iranian exports, but now must adjust to increasing volumes of Atlantic Basin crude and NGLs. The continued rise in output and slowing demand growth will complicate efforts by key producers to defend their market share and maintain elevated oil prices."
Conclusion: Despite all the Gloom & Doom macroeconomic noise, IEA expects demand for oil-based products to increase by 1.1 million barrels per day from 2023 to 2024. I will be updating my forecast/valuation models based on 2024 prices averaging $80/bbl for WTI (down $10/bbl) and $3.25/MMBtu for HH ngas. I do expect oil prices to remain in the $70s for Q1, then rise as the Fear of Recession fades in the spring. Demand for transportation fuels always increases as summer approaches. U.S. natural gas prices will need some help from the weather, but if LNG exports stay near capacity (14 Bcfpd) natural gas storage levels should normalize. Just a normal January should wipe out the surplus to the previous year's inventories within six weeks.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: IEA Oil Market Report - Dec 14
Dan, I watched Powell yesterday, I think the FED has taken away much of the hysteria around a "recession." All the news was good. DOW jumped 525 points after his remarks. I expected to go in reverse on his normal hedging. Didn't happen thankfully. IEA report compared to the OPEC+ reports defy imagination...you get bad numbers when fear enters the picture...obviously the bureaucrats are trying to please their overlords in Paris. OPEC is in the arena, the Paris bureaucrats are observers. Theodore Roosevelt comes to mind:
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Re: IEA Oil Market Report - Dec 14
January 23 we got the humbled report from Marshall Adkins taking responsibility for his whiff with bullish report on natural gas in November of 2022. I guess we will be hearing his refrain in January 24 on his bullish forecast on oil.
Re: IEA Oil Market Report - Dec 14
Craziest damn oil market I have ever seen. Pundit(not an oil man but a guy that looked like he had some back room knowledge) on Fox Business News yesterday was confidently stating that oil prices would stay low thru the 24 election. When quizzed would not directly answer but he insinuated that the data was "controlled" and the never to be made public deals with Russia, Iran and Saudi have been made to keep the Dems in office. Nothing about this message I like and it seems like a big market to move but there is a lot going on we will never know.
Re: IEA Oil Market Report - Dec 14
Controlled by CTA oil paper traders working in concert with the Biden WH, European governments, NGOs ( think IEA). Totally predictable as the law of supply / demand fundamentals is turned on its head. Just like one can’t fight the Fed, you can’t fight the oil algo so sell calls against your companies especially those dividend producers between payouts. And wait it out.