Energy Prospectus

One of the points that I stress in the July 24th edition of The View From Houston newsletter is that IEA under-estimates annual gains in oil demand year-after-year. Demand from India has been grossly under-estimated by IEA for five straight years.

From the TPH Morning Note 7-24-2018

India Oil Demand Update: Q2'18 at +6% y/y, India could account for 20% of global demand growth this year

Data from India's Petroleum Planning & Analysis Cell showed overall oil demand grew a robust +8% y/y in Jun'18, raising Q2'18 to +6% y/y following Q1 at +8% y/y. Q2 featured strong gains in gasoline (+9% y/y) and our “Other” category (+8% y/y), which includes LPGs. However, India's distillate demand growth slowed (+3% y/y) as industrial production waned, and fuel oil flipped to negative (-10% y/y) on account of the country's ongoing efforts to reduce air pollution. India accounts for only 4.5% of global oil demand, but the current +7% YTD growth pace implies the country could represent roughly 20% of the IEA's 2018 global oil demand growth forecast of +1.4mmbpd.


MY SWAG: When the final demand growth numbers are in for 2018, my guess is that demand for oil will have gone up by 1.8 to 2.0 million barrels per day. Keep in mind that IEA's "Demand for Oil" estimates are really "Demand for Refined Products Made from Oil" and some of those products are made from biofuels and NGLs, however the bulk of them are refined from black oil or crude oil.

The article at the link below explains why releasing oil from the SPR in an attempt to lower gasoline prices at the pump probably won't work.

https://www.bloomberg.com/view/articles ... price-pain

If Trump times it right (say a few weeks before the Labor Day Weekend) it might have a short-term impact. However, I am 100% against the use of the SPR to manipulate fuel prices. Heaven forbid that we ever really need the SPR, because IMO it is there to protect the U.S. economy if a nuke goes off in the Middle East.

Oil Edges Up as Market Shrugs Off U.S.-Iran Tensions. The Wall Street Journal.

Oil prices ticked up only slightly Tuesday morning, despite escalating tensions between the U.S. and Iran that could further disrupt oil exports from the Islamic Republic. Brent crude, the global benchmark, was up 0.18% to $73.19 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.46% at $68.19 a barrel. Prices swung between gains and losses before closing lower Monday following threats between President Donald Trump and his Iranian counterpart, Hassan Rouhani, as the oil market tried to assess how much Iranian crude supply might be at risk. Mr. Trump in May pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions that are expected to hinder Iran’s oil industry. Analysts have estimated up to 1 million barrels a day of Iran’s more than 2.5 million barrels a day in crude exports could be at risk. Mr. Trump has vowed to impose the strictest sanctions possible.

If you take a hard look at the chart on page 4 of The View From Houston newsletter, you see that if Iran's oil production declines by a million barrels of oil per day there is NO WAY that OPEC can even hold the cartel's production flat.

Oil prices could hit as high as $200 a barrel if Iran shuts down the Strait of Hormuz or engages in military conflict with the United States, Again Capital's John Kilduff warns.

Watch this video: https://www.newsmax.com/finance/markets ... 7324c9e2b8

Iran's leaders this weekend threatened to shut the strait, the world's most important seaborne transit lane for oil. The comments appeared to provoke a response from President Donald Trump threatening severe consequences for Iran.

Kilduff, founding partner at energy hedge fund Again Capital, said Brent crude — the international benchmark for oil prices — is on a path to $90 a barrel because the Trump administration is unlikely to issue many sanctions waivers.