Oil Supply/Demand - Dec 19

[dan_s]

Note from Keith Kohl at The Energy Investor with my comments in blue.

The Wall Street Journal reported last week that the IEA lowered its demand growth
projections for 2023 to 2.3 million barrels per day. < BTW another world record for oil demand.

More importantly, it weakened its projections next year, which the IEA now only
expects to grow by 1.1 million barrels per day. At that rate, global consumption in 2024
will average 102.8 million barrels per day. I should note that the IEA actually raised its
2024 demand projections slightly compared to its previous estimate. < Trust me, this is just the first of several more demand forecast increases from IEA.

Still, the IEA is banking on slower economic growth worldwide to cut demand
growth in half next year. Not only is global economic growth expected to slow to
2.6%, but their predictions are largely based on a sharp slowdown in China’s growth
to just 4.2%.

Keep in mind, this is supposed to occur as non-OPEC supply in the U.S., Guyana, and
Brazil are expected to jump by 1.8 million barrels per day.

Personally, I’m not convinced that we should be as pessimistic over IEA’s predictions.
More importantly, I believe that the market is overestimating non-OPEC’s ability to
raise supply.

While it’s true that U.S. output is at record levels again, how much higher we can
take it remains to be seen — especially in an environment with fewer rigs out in the
field, as well as a hostile administration toward the oil and gas industry that is greatly
hindering offshore growth by limiting lease sales.

Of course, whenever we see a bearish outlook from the IEA, it’s only a matter of time
before we see another bullish outlook by OPEC; the two have been going back and
forth all year trying to push separate narratives on oil’s direction.

And like clockwork, OPEC announced that it was leaving its global demand scenario
for 2024 unchanged. The oil cartel still believes that demand will average 2.2 million
barrels per day next year.

Over the next twelve months, one of them will be gloating, and the other will have
egg all over their face. < My bet is that OPEC's demand forecast is more accurate and may be too low.