The International Energy Agency (IEA) Sounding the International Energy Alarm (NASDAQ:ALRM) (IEA). The International Energy Agency (IEA) (or the other IEA) peak oil demand story might have to wait until another day as we start to see concerns about the supply side. OK, I know the IEA had the IEA alphabet first. Whether it is global oil demand that is exceeding expectations or successful OPEC production cuts, global oil inventories are not reflective of the recent bearish action in the petroleum markets.
That may be one of the reasons that oil may have finally broken off this seemingly endless trading range to the upside. Even The International Energy Agency (IEA) said we could stop investing in fossil fuels and start investing in green energy projects that must be alarmed about supply in their most recent report. The IEA reported that global observed oil inventories grew by 39.3 mb in October, led by an exceptionally sharp decline in oil products (-82.3 mb) as low refinery activity coincided with a rise in global oil demand. OECD industry stocks declined by 30.9 mb to 2 778 mb, 91.6 mb below the five-year average.
In fact, the IEA reported that world oil demand growth is set to accelerate from 840 kb/d in 2024 to 1.1 mb/d next year, lifting consumption to 103.9 mb/d in 2025. They predict increases in both years will be dominated by petrochemical feedstocks, while demand for transport fuels will continue to be constrained by behavioral and technological progress.
While non-OECD demand growth, notably in China, has slowed markedly, emerging Asia will continue to lead gains in 2024 and 2025.
In the US, John Kemp at John Kemp Energy says that US gasoline inventories are at the lowest seasonal level since 2021 and before 2015. Stocks were 6 million barrels (-3% or -0.94 standard deviations) below the prior ten-year seasonal average on December 6, though the deficit has narrowed slightly from 9 million barrels (-4% or -1.21 standard deviations) four weeks earlier.
The other factor that has been driving the rebound in oil prices concerns tighter sanctions, on just about everybody. Both the United States and Europe are talking about cracking down on Russian oil revenue and oil exports. And it’s very clear with the incoming Trump Administration that they’re going to resume the maximum pressure, incoming National Security Adviser Michael Waltz told ‘America Reports’ and that too is supporting oil. “You’re going to see a huge shift on Iran,” after Trump takes office on Jan. 20, “We have to constrain their cash. We have to constrain their oil. We have to go back to maximum pressure, number one, which was working under the first Trump administration.”
In the big picture, the global demand for energy is looking more bullish every day. Power is reporting that “Exxon Mobil (NYSE:XOM) is preparing to join the power generation business, seeing an opportunity to support the electricity supply for energy-intensive data centers. The company on Dec. 11 said it is designing what was referred to as a “massive” Natural Gas Futures-fired power plant that would be dedicated to producing power for data centers. Reports said the facility could have a generating capacity of more than 1,500 MW. Darren Woods, Exxon’s chief executive, said in a media call on Wednesday, “There are very few opportunities in the short term to power those data centers and do it in a way that at the same time minimizes, if not completely eliminates the emissions.” There currently are no U.S. natural gas-fired power plants with carbon capture technology, although NET Power on Monday said it would build gas-fired generation in California and utilize carbon capture.
Electric utilities and power generators are scrambling to find ways to serve what’s expected to be an exponential increase in energy demand from artificial intelligence and the high-tech sector. Natural gas, in part due to its lower cost, has emerged as a leading option for an industry looking for 24/7 electricity. Nuclear power also is being considered, along with renewable energy and energy storage.
Natural gas will get the report today and we should see a 160 bcf withdrawal. The key thing for the natural gas market is whether December is going to warm up dramatically or just a little bit but because of the cold start to December, inventories are drawing faster than the market had originally anticipated.