Previously, we reported that energy agencies have been growing more bearish with their forecasts on oil demand growth with four experts including IEA and OPEC Secretariat giving divergent views. Alarmingly, the normally bullish U.S.-based Energy Information Agency (EIA) has cut its forecast in each of the past nine months.
The EIA’s latest growth prediction of a decline of 420,000 barrels per day (kb/d) in what experts refer to as the call on OPEC (i.e. global demand minus non-OPEC supply) in the current year, a level 1.87 million barrels per day (mb/d) lower than its July 2022 forecast.
Other agencies expect lackluster growth: Standard Chartered sees “the call” growing by just 63,000 b/d, 1.41mb/d less than its July 2022 forecast, while the International Energy Agency (IEA) expects growth of 400kb/d, 2.326mb/d below its July 2022 forecast.
The upshot of it all is that all four agencies at least expect some growth, though they can’t seem to come close to finding consensus on the magnitude.
But here’s the best part: at least one expert has predicted that oil demand will hit an all-time high in the current year. Commodity experts at StanChart have predicted that global oil demand will set a new all-time high of 102.24mb/d in August, surpassing the previous record of 102.2mb/d set in August 2019.
Source: Standard Chartered Research
Regarding the question of whether fundamentals are improving or weakening, StanChart says we can put on both our bullish and bearish lenses.
The bullish interpretation simply is that this is an all-time high; the bearish one is
that it has taken no less than four years for global demand just to get back to the previous high. Indeed, StanChart reckons that had it been business-as-usual during those four years, global oil demand would have increased by another 5mb/d. Even better, StanChart sees oil demand setting fresh all-time highs in both November and December with demand set to rise above 103mb/d for the first time in June 2024.
On the natural gas front, natural gas futures pared their Tuesday gains in early trading in Wednesday’s intraday session as traders continued to mull the impact on balances of a chilly late April weather pattern. Gas prices jumped more than 9% on Tuesday after weekend weather forecasts pointed to a second consecutive period of strong demand for natural gas due to colder weather. Mild weather-driven demand has taken a toll on gas markets, with Henry Hub prices trading as low as $1.84 on Friday.
Wednesday’s fall marks an end to a three-session rally. From a technical standpoint, ICAP Technical Analysis analyst Brian LaRose has told Natural Gas Intelligence that the bulls still have some work to do to take control of the market:
“Still peg the 50-day moving averages as the immediate challenge. These moving averages are presently converging with the upper bollinger bands. Run into resistance and Henry Hub has the potential to be violently repelled. Bust through these moving averages and we will have the first hard evidence suggesting a major shift in the narrative may be taking hold,” LaRose said.
Although the short-term outlook remains soft with a swing back to light national demand expected due to warm weather in southern and eastern halves of the U.S., the medium term outlook is likely to improve with NatGasWeather predicting that much more of the U.S. will experience cooler than normal lows of 20s to lower 40s as the cold front progresses eastward, triggering relatively strong late season demand.
Meanwhile, Russia’s state-owned gas supplier, Gazprom has warned Europe that there “...is no guarantee that nature will make such a gift” again, referring to the continent successfully making it through winter despite cuts in Russian gas supplies thanks to a warmer-than-expected winter. Europe has failed to secure enough long-term LNG contracts to offset cut-off Russian gas imports, with Reuters predicting this may prove costly next winter and could sharply tighten the market. The European Union views natural gas as a bridge fuel in the transition to renewable energy, and buyers generally struggle to commit to long-term contracts. This means that Europe might be forced to buy more from the spot markets like it did in 2022, which in turn is likely to push prices up.
By Alex Kimani for Oilprice.com