Let’s face it, the OPEC plus cartel the International Energy Agency (IEA) and the Energy Information Administration EIA are basically a hot mess. The growing divergence in predictions for both supply and demand and whether oil demand will eventually go away or continue to grow as market participants just scratching their heads. Predictions of peak oil production and peak oil demand and record adjustments have added confusion to the market and for both users and producers of oil.
As we have said before, the International Energy Agency, in my humble opinion, is one of the worst forecasters when it comes to global supply and demand. I pointed out in the past that they have basically said that they’ve skewered their data to raise more awareness about the threats of climate change.
The IEA's job was never to combat climate change but to ensure energy security for oil-consuming nations. It’s sad to see that this once noble organization has lost its way and admittedly skewered its supply and demand forecast to push the green energy agenda.
OPEC on the other hand has a better track record and has predicted that the death of global oil demand is highly exaggerated. OPEC has even poked fun at the International Energy Agency for the way they’ve had to backtrack on their peak oil demand predictions.
OPEC and the IEA divergence in the market outlook was highlighted once again after the International Energy Agency reduced its forecast for demand growth for this year to 1.1 million barrels a day while OPEC kept their demand growth forecast for this year at 2.2 million barrels. The International Energy Agency pointed to weak demand in Europe and a mild winter as the reason for the downgrading of its demand forecast for this year. OPEC on the other hand sees demand growth continue with record oil imports into places like India and China.
While The International Energy Agency boldly reduced its demand forecast for this year, they more quietly seem to shift back its prediction for peak oil demand once again. Dan Tsubouchi at Energy Tidbits reports that the IEA demand doesn’t even add up to what the headlines are saying. He wrote, “Rinse & repeat? IEA in April cuts its 2024 year-over-year oil demand growth by 120.000 barrels a day and now IEA for May cuts 2024 year-over-year oil demand growth by 140.000 barrels a day.
As many of you remember the International Energy Agency years ago predicted that oil demand globally peaked a few years ago. They continue to overestimate the ability of alternative fuels to replace traditional fossil fuels in the global economy. Yesterday, in an interview with Bloomberg, the International Energy Agency's Toril Bosoni was asked whether the International Energy Agency sees peak fossil fuel demand being pushed back towards the end of the decade seemed to suggest that peak oil demand might not be so much a peak but a plateau.
Ms. Bosoni was quoted as saying, "We see an oil demand plateau rather than a steep peak towards the end of the decade based on our current assumptions.”
So, in other words, we will be using fossil fuels a lot longer than the International Energy Agency has said in the past.
It seems like the oil market is still pessimistic on demand even after we got a supportive Energy Information Administration’s (EIA) inventory report and a weaker-than-expected consumer price index report.
Also concerns by EIA that average monthly prices for regular-grade retail gasoline in the United States could increase by more than 10 cents per gallon (gal) if refinery output is lower than expected. Oil did manage to close on a strong note, but it was disappointing considering the run that we had on copper, silver, gold, and the stock market.
Oil seemed disappointed that the OPEC plus cartel decided to hold their June meeting virtually. That perhaps means that OPEC will agree to extend their production cuts through the end of the year. The move to a virtual meeting means more than likely they will wait to decide on an extension of the cuts into 2025 for another meeting raised fears that they might not extend the cuts at all.
The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.5 million barrels from the previous week. At 457.0 million barrels, U.S. crude oil inventories are about 4% below the five-year average for this time of year.
Total motor gasoline inventories decreased by 0.2 million barrels from last week and are about 1% below the five-year average for this time of year. Distillate fuel inventories slightly decreased last week and are about 7% below the five-year average for this time of year.
Total demand based on products supplied over the last four-week period averaged 20.1 million barrels a day, up by 0.7% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.7 million barrels a day, down by 4.5% from the same period last year.
Distillate fuel product supplied averaged 3.6 million barrels a day over the past four weeks, down by 5.3% from the same period last year. Jet fuel product supplied was up 3.7% compared with the same four-week period last year.
Jodi reported that “Crude inventories built by 17.7 mb in February but were still 262 mb below the 5-year average. Product inventories drew by 2.9 mb but were 4.8 mb above the 5-year average.
Natural gas traders will look at today’s Energy Information inventory report for natural gas to see if the impressive recovery rally can continue. The back end of the gas curve once again moved above $5 which is a sign that demand expectations for natural gas are going to explode in the coming years. In the short term, traders will look at today’s report which should come in with an injection somewhere in the area of 76 BCF.