It looks like peak oil demand will still be somewhere far out in the future. Despite predictions by organizations like the International Energy Agency (IEA) that oil demand would peak, the fact is that today oil demand is exceeding supply.
The IEA as you remember warned that if we kept investing in fossil fuel, we would have a massive oil glut, it seems that the truth has turned out to be the opposite.
The Energy Information Administration said that global oil demand is 103.35 million barrels a day while global oil production is at 102.85 mbpd in June 2024.
This comes as the American Petroleum Institute reported a slightly bearish weekly report with a larger-than-expected 3.31-million-barrel increase in gasoline supplies and crude oil supplies up 180,000 barrels and distillates up 122,000 supplies roughly in line with expectations.
Instead of an oil supply glut, we have a supply deficit that may grow wider in the years to come even as the government wastes trillions of dollars on electric car subsidies.
Even as oil price fretted about the stock market meltdown or correction and fears about slumping demand in China, somehow oil demand is still exceeding supply.
Rapid demand growth in India, which according to the latest data increased by 7.4% year over year to a record high of 9.653 million tons in July, has offset somewhat the demand drop in China.
Reuters reported that China’s daily crude oil imports in July fell to their lowest since September 2022. Reuters records of customs data shows weak processing margins and low fuel demand curbed operations at state-run and independent refineries.
China in 42.34 million metric tons in July, or about 9.97 million barrels per day(bpd), data from the General Administration of Customs showed. India has moved more towards capitalism and China further away from it. And in the US, the world’s largest oil consumer, demand is even better than the Energy Information Administration (EIA) said it was.
The EIA lifted its forecast for 2024 U.S. oil demand by 100,000 bpd to 20.5 million bpd. It left its 2024 world oil demand growth forecast unchanged, with consumption increasing year-over-year by 1.1 million bpd to 102.9 million bpd.
The EIA did lower its forecast for 2025 world oil demand to 104.5 million bpd, versus a previous forecast of 104.7 million bpd. The majority of that reduction is due to slowing economic growth in China.
As readers know I’ve been a longtime critic of the International Energy Agency many years ago I called out the agency for losing their vision on energy security.
The Financial Times wrote a piece about the International Energy Agency and about the same criticism that I brought up years ago. One of the most glaring points of that article is the differing viewpoints of OPEC and the International Energy Agency on global oil demand.
The FT reported that the IEA and OPEC were once closely aligned on their energy forecast but now have vastly different views of the future of oil. The IEA believes that world well demand will peak in 2029 at 105.6 million barrels a day. OPEC on the other hand, expects to see no peak in the oil demand rising to 116 million barrels of oil a day.
The IEA in the past has been very poor at predicting future oil production. OPEC has a much better track record. So let’s assume that investors believe the International Energy Agency is right and not OPEC.
That could be a massive mistake. If we’re investing just enough money to raise global production to 105 million a day and it turns out to be 116 million barrels a day, we’re going to have major problems with the global economy.
Stability on the stock market and the supply squeeze in oil is giving us support even if it appears that Iran is backing off its blustering threats to attack Israel.
On the natural gas market, as we mentioned, yesterday’s support is being found from the fact that more companies are thinking about cutting production of natural gas and oil to avoid a natural gas glut.
The latest report comes from Reuters that says major US natural gas producers are preparing further production cuts in the second half of 2024 after prices sank 40% over the past two months. EQ1 of the top gas producers in the country has embedded about 90 billion cubic feet of strategic curtailments this fall. Apache cut 78 MMCFD of gas production in the second quarter.
The IEA yesterday said that US natural gas production will average about 103.3 billion cubic feet this year which is down from their previous prediction 103 point 8 billion cubic feet produced last year and went downward forecast from July.