Energy Prospectus

In the "Real World" there is no evidence that demand for oil based products is declining.

According to the latest figures reported to the Joint Organisations Data Initiative (JODI).
> The world’s top 18 consuming countries, each using more than 1 million barrels per day, reported a rise in consumption of 1.6% in the three months from June to August compared with the same period a year earlier. < This world now consumes over 100 million barrels per day of hydrocarbon based refined products, most of which are made from crude oil.
> That was the fastest rate since the start of the year and a marked turnaround from the small year-on-year decline in the three months between March and May.

As I have pointed out many times in my weekly podcasts: Demand for oil is seasonal.

October is usually the low point each year for crude oil demand, thanks to an end to the summer driving season (90% of humans live in the Northern Hemisphere) and refiners do most of their annual maintenance in October. Demand for oil should be 1.5 to 2.0 million barrels per day higher from October, 2019 to June, 2020. This happens each year. If U.S. oil production declines in Q1 2020, which is my current forecast, the global oil market will MUCH TIGHTER next summer.

BTW there is no evidence that oil demand from China has slowed down.

Kemp has a slightly different take on the JODI data. Also, however, his view of the potential impact of a trade deal with China is consistent with your position that the market would receive a deal very positively.

Global oil consumption remains sluggish: Kemp - Reuters News
26-Nov-2019 14:28:07
John Kemp is a Reuters market analyst. The views expressed are his own
By John Kemp
LONDON, Nov 26 (Reuters) - Global oil consumption has apparently accelerated since mid-year as lower prices filter through the supply chain, increasing demand and avoiding a big increase in inventories.

But all may not be as it seems. Much of the growth has come from China, where reported consumption is rising at rates inconsistent with the country’s slumping auto sales and slowing economy.

China’s fuel distributors and consumers have most likely taken advantage of lower prices to boost the amount of products held at fuel depots and in end-user tanks before prices rise again.

If that is the case, much of the increase can be accounted for by a one-time shift in the location of stocks rather than a sustainable increase in consumption and it will likely unwind if prices rise again next year (https://tmsnrt.rs/2XP8U7d).

Consumption in the rest of the world remains sluggish, according to the latest government figures reported to the Joint Organisations Data Initiative (JODI).

The world’s top 18 consuming countries, each using more than 1 million barrels per day, reported a rise in consumption of 1.6% in the three months from June to August compared with the same period a year earlier.

That was the fastest rate since the start of the year and a marked turnaround from the small year-on-year decline in the three months between March and May.

But China's reported surge in consumption of almost 13% year-on-year in June-August -- among the fastest rates of the last eight years -- is flattering the figures and hard to square with the country's economic backdrop.

Excluding China, consumption in the other top-17 countries was down 0.9% in the three months from June to August compared with a year ago, an improvement on a few months ago, but still weak.

The flat or falling consumption trend in the rest of the world is consistent with the decline in global freight movements and the decline in global manufacturing activity reported in business surveys.

If the United States and China manage to agree a trade truce allowing the global economy to pick up momentum next year, wider oil consumption growth should accelerate and push prices higher.

But to the extent higher prices put an end to China’s restocking, or induce destocking, the pick-up in consumption is likely to prove smaller than some oil market bulls anticipate.

In my opinion, John Kemp is bearish on the global economy because he lives in London. Much more gloom & doom in Europe and the Brexit stuff is a much bigger deal in their minds across the pond. IMO Europe becomes more insignificant each year. John also takes the BS that EIA publishes as the gospel truth.

Regarding global demand growth, here is an excerpt from a usually reliable poster on IV energy investing mb:

Global demand grew from 61 million barrels of oil per day (Mb/d) in 1980 to 77 Mb/d in 2000 and 100 M/d in 2018. Over the past 33 years, annual oil demand has only failed to increase three times, during periods of severe economic recession.

Further, over the past decade the pace of oil demand growth has accelerated. Annual oil demand growth has been over one Mb/d since 2012. It was over 1.5 Mb/d in 2017 and 1.4 Mb/d in 2018. The period since 2012 has witnessed the fastest sustained period of demand growth in history. Demand is at its highest level ever. This is confirmed by all major authorities, including the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA).


Both the IEA and EIA produce regular reports on current oil market trends. Oil demand will continue to surge ahead at an average annual rate of 1.2 Mb/d. By 2023, the IEA projects global oil demand to reach 104.7 Mb/d. China and India together will account for nearly 50% of global demand growth. The IEA goes further, and states that “there is no peak oil demand in sight.”