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Pierre Andurand Sees Oil Demand Surprising To The Upside

Global oil demand is more likely to surprise to the upside even in a very weak economy, popular hedge fund manager Pierre Andurand said in a Twitter thread on Friday.

Due to COVID-related lockdowns, demand has been way below trend over the last few years, the hedge fund manager said.  

Average annual oil demand growth from 2000 to 2010, and 2010 to 2019 was quite steady at around 1.2 million bpd to 1.3 million bpd, and in line with population growth over time, Andurand noted. Taking 2019 as a base, and estimating demand growth at 1.2 million bpd per year, we should be at 104.2 million bpd of demand for 2022. But the latest estimate is 99.2 million bpd, or 5 million bpd below trend already, the hedge fund manager noted.

“Very weak demand is already in the forecasts,” Andurand said, but added that “it is more likely to surprise to the upside, even in a very weak economy, assuming we can get enough supply.”

In the first weeks after the Russian invasion of Ukraine, Andurand said that oil prices could jump to an all-time high of $200 per barrel by the end of this year, as oil producers ranging from African members of OPEC+ to the U.S. shale patch would struggle to replace the Russian crude that is going off the market. 

Forecasts of global demand growth have been downgraded in recent weeks amid concerns that high fuel prices are starting to dent demand and that an economic slowdown, and even recession, is in the cards in the near future as central banks have begun an aggressive cycle of key interest rate hikes to fight high inflation.

The International Energy Agency (IEA), for example, revised down last week its oil demand growth estimate by 100,000 bpd to 1.7 million bpd growth for 2022.

“Higher prices and a deteriorating economic environment have started to take their toll on oil demand, but strong power generation use and a recovery in China are providing a partial offset,” the agency said in its closely-watched Oil Market Report (OMR) last week.

By Charles Kennedy for Oilprice.com

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