President Trump’s desire to cut energy prices in half will be a lot easier if the International Energy Agency’s prediction of a coming oil glut is correct. (spoiler alert; it is probably not). In fact, the Internal Energy Agency (IEA) has a history of making bold predictions on supply and demand that rarely come true. Yet in all fairness, the fine line between a global oil market surplus or a global oil market supply deficit is thinner than it has been in the past because of record oil production of light oil in the US and rising production in other non-OPEC.
The IEA is predicting a coming oil glut. The OPEC Plus cartel is subdued because of weak demand from China regardless of what they decide to do regarding their production cuts. That prediction may be a little IEA shot at the OPEC -Plus cartel because they had to reduce their more optimistic demand forecasts four times in a row. Now the IEA may be suggesting that the old cartel is becoming irrelevant.
Of course, if the IEA wants to throw stones, they must remember that they live in a glass house. I am sure it is a very energy efficient glass house, but if you want to put their past predictions on supply and demand and compare it to OPEC, I think their solar powered glass house would be shattered.
The IEA says that even as global oil demand is at all-time highs they say demand remains ‘subdued’. The IEA predicts that, “World oil demand is forecast to expand by 920 kb/d this year and just shy of 1 mb/d in 2025, to 102.8 mb/d and 103.8 mb/d, respectively. The slowdown in growth from recent years reflects the end of the post-pandemic release of pent-up demand and below-par underlying global economic conditions, as well as clean energy technology deployment.
The IEA did acknowledge that global oil inventories plunged by 47.5 mb in September, to their lowest level since January, led by a sharp draw in OECD oil products and non-OECD crude oil stocks. OECD industry stocks fell by 36.4 mb to 2 799 mb, 95.3 mb below the five-year average. Provisional data suggest total global stocks decreased for a fifth consecutive month in October. They predict that global oil supply rose by 290 kb/d in October to 102.9 mb/d, as the return of Libyan barrels to the market more than offset lower Kazakh and Iranian supplies.
OPEC+ delayed the unwinding of extra voluntary production cuts to January, at the earliest. Non-OPEC+ producers will boost supply by roughly 1.5 mb/d in both 2024 and 2025. Yet betting on the IEA hope for an oil glut could be dangerous if China demand exceeds their expectations. With global oil inventories below average it won’t take much of an uptick in demand to send us higher. Winter, anyone?
Besides, the next OPEC-plus meeting is scheduled for the 1st of December. 2025 oil policy will be discussed, and they may want to send a message, not just to the oil market but the world’s biggest green energy agency, known as the IEA. This comes as both OPEC and Russia continue to stress the importance of their cooperation and their commitment, to the oil market.
Still oil prices are getting its Trump dump. The key thing we are seeing is a reduction of geopolitical risk premium as our advisories are wary of doing the same things they got away with the current administration.
Iran hates Donald Trump so much they tried to have him killed, but they sure do fear and respect him. Sources tell Sky News Arabia that Iran is standing down from retaliating against Israel after a warning message was conveyed via Iraq. Iran is now exploring negotiations with the Trump government.
Iran may start the negotiations like. Oh Donald! That assassination attempt was just a big misunderstanding. Please, oh please let us sell our oil. We promise to behave.
Below $3.00 gas as a national average might prove to be elusive, but we will be close but no cigar. While some parts of the country will be below $3.00 a gallon, the possibility of a squeeze up in California prices and other major markets may keep the national average from tipping below that point before Thanksgiving with the improvement and the crack spread and demand expectations on the rise it’s going to be tough but stay tuned.
We told natural gas traders they should download the Fox Weather app because once again weather developments gave natural gas a big pop to the upside. Fox Weather reports that Tropical Depression Nineteen to become Tropical Storm Sara, slam Central America with life-threatening impacts. The NHC said Tropical Depression Nineteen will continue to move to the west on Thursday, taking it across the western Caribbean Sea. After that, the system is expected to stall and meander near the coast of Honduras on Friday and through the weekend. The track of this storm looks like it’s very possible that it will move offshore. Natural gas production that has just recovered from the last hurricane.
The long-term outlook for natural gas is looking incredible as the war on fossil fuels will end under the Trump presidency. Even people that are very concerned about climate change found it ridiculous that the Biden administration tried to discourage the exports of liquefied natural gas and discourage production of the one fuel that could make significant reductions in global greenhouse gas emissions by replacing dirty or coal and oil.