Alex Kimani

Alex Kimani is a veteran finance author, investor, engineer and researcher for Safehaven.com. 

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• In a current report, Commonplace Chartered concluded that demand hit an all-time excessive of 103.79 million barrels per day in August.
• Whereas demand development is decrease than in all different post-pandemic Augusts, it may well hardly be thought of weak.
• StanChart factors out that merchants proceed to disregard the truth that non-OPEC provide has slowed greater than demand thus far in 2024.

Momentum in oil markets has continued to skew in the direction of the draw back over the previous two weeks, with the final 10 buying and selling days seeing front-month Brent report seven decrease settlements, eight decrease intraday highs and 6 decrease intraday lows. In the meantime, the 30-day realized annualized Brent volatility soared to an 11-month excessive of 39.1% at settlement on 21 October, good for a w/w enhance of three.1 ppt. December Brent declined 1.7% to commerce at $$74.80 per barrel at 13.20 pm ET in Wednesday’s intraday session whereas WTI crude for December supply fell by an analogous margin to commerce at $70.55 per barrel.

Final week, we reported that the appreciable variations in provide/demand estimates by the main power companies have been making it onerous to gauge precise world crude provide. As an example, in line with the EIA, the UAE produced simply 18kb/d above goal in September, whereas the IEA sees the overrun as a considerable 348 kb/d. Nevertheless, commodity specialists at Commonplace Chartered have reported that demand issues stay the most important bearish catalyst for oil markets.

StanChart notes that on 21 October, Fatih Birol, the Govt Director of the Worldwide Power Company (IEA), said “This 12 months, world demand may be very weak, a lot weaker than earlier 12 monthss”, incorrectly implying that oil demand is decrease than in earlier years. 

Nevertheless, StanChart says oil demand development, not absolute oil demand, is what has been slowing down from earlier post-pandemic years. Certainly, StanChart says world oil demand has been setting a collection of recent all-time highs within the present 12 months.

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The analysts have been capable of calculate world demand after the discharge of the most recent Joint Organisations Knowledge Initiative (JODI) knowledge on October 17, and concluded that demand hit an all-time excessive of 103.79 million barrels per day (mb/d) in August, an upwards shock of about 450 thousand barrels per day (kb/d) above their (pre-JODI knowledge launch) forecast. August turns into the third successive month by which a brand new all-time demand excessive has been set, with StanChart figuring out that demand development clocked in at 1.32 mb/d in August.

Whereas that is decrease demand development than in all different post-pandemic Augusts, it may well hardly be thought of weak. StanChart has reported that the biggest demand features in August got here from Korea (219 kb/d), Italy (185 kb/d), Saudi Arabia (117 kb/d), Türkey (99 kb/d) and Spain (88 kb/d). StanChart has now revised its 2024 world demand development estimate upwards to 1.45 mb/d, due to the bigger-than-expected development in August.

StanChart factors out that merchants proceed to disregard the truth that non-OPEC provide has slowed greater than demand thus far in 2024. In keeping with estimates by the IEA, non-OPEC provide development slowed down from 2.40 mb/d in 2023 to 0.93 mb/d in 2024, whereas demand development slowed down from 1.99 mb/d in 2023 to 0.86 mb/d in 2024. The IEA, due to this fact, estimates that non-OPEC provide in 2024 has grown slower than provide in 2023 by 1.47 mb/d whereas demand has slowed by a smaller margin of 1.13 mb/d. Different power companies have provide you with even bigger relative supply-side slowdown estimates than the IEA. As an example, the U.S. Power Info Administration (EIA) estimates that non-OPEC provide has slowed by 1.89 mb/d from a 12 months in the past (from 2.52 mb/d in 2023 to 0.63 mb/d in 2024) whereas demand has slowed by 1.19 mb/d (from 2.10mb/d in 2023 to 0.91mb/d in 2024). StanChart estimates that non-OPEC provide has slowed by 1.83 mb/d in 2024 (from 2.50 mb/d in 2023 to 0.67 mb/d in 2024) whereas demand development has slowed by 0.60 mb/d (from 2.05 mb/d in 2023 to 1.45 mb/d in 2024).

On the availability aspect, within the near-term, StanChart has labored out that the IEA mannequin implies a world inventory draw of 370 kb/d in Q3-2024, even while you embody a possible 1.3 mb/d of [possible] ghost barrels. Additional, StanChart’s mannequin reveals a small H1-2025 provide deficit of 0.2 mb/d, even when voluntary output cuts are scaled again, however provided that Russia, Iraq and Kazakhstan compensate for previous overproduction. Again in July, the three OPEC+ members submitted their compensation plans to the OPEC Secretariat for overproduced crude volumes for the primary six months of 2024. In keeping with OPEC, the whole over-produced volumes will probably be totally compensated for over the following 15 months by way of September 2025, with Russia ‘paying again’ a cumulative 480 kb/d, Iraq 1,184 kb/d and Kazakhstan 620 kb/d.

By Alex Kimani for Oilprice.com

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