Power Up: Oil bulls frustrated again
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Aug 15 - By John Kemp, Senior Market Analyst
Welcome to Power Up! This week is all about oil. Crude prices have reverted to their long-term inflation-adjusted average as expectations for a big production deficit fade and traders become pessimistic about the outlook for fuel consumption. U.S. shale firms have continued to boost production, using fewer rigs more effectively, prolonging their challenge to OPEC. On the demand side, jet fuel forecasts have been downgraded as the post-pandemic revenge travel boom ends. And U.S. refiners have trimmed processing in the face of elevated inventories and weaker crack spreads. Traders are now waiting to see if impending interest rate cuts will reignite demand growth.
Oil demand disappoints
Jet and diesel use undershoots as economy stutters
Global oil consumption is growing more slowly than anticipated at the start of the year as the rebound in the major economies runs out of momentum and consumer travel returns to normal after the post-pandemic boom.
Global inventories have depleted this summer but the drawdown has been relatively slow, from an elevated starting point, which has taken much of the bullishness out of the market.
Portfolio managers have cut their combined position in the six most important petroleum futures and options contracts to a record low in data going back to 2013.
U.S. oil refiners have cut processing of crude and other feedstocks to the slowest for several years in the face of sluggish fuel consumption and rising stocks especially for diesel and jet fuel.
Jet consumption in both the United States and China has undershot forecasts as a result of sluggish air freight, increasing resistance from passengers to higher airfares, and improvements in aircraft efficiency.
U.S. jet fuel inventories have climbed to the highest for the time of year since 2010 as the post-pandemic surge in business and consumer travel has started to fade.
Diesel demand has also been sluggish as manufacturers have reported declines in activity in the second and third quarters across the United States, the Eurozone and China, and biofuels take an increasing bite out of the market.
OPEC’s secretariat this week downgraded its forecast for demand growth in 2024 but it remains high and well above alternative forecasts by the U.S. Energy Information Administration and International Energy Agency, risking further downward revisions.
Lower oil prices are contributing to disinflation in the United States and Europe, giving central banks more confidence to start trimming interest rates.
Oil tradersmust now wait to see whether lower rates reverse some of the slowdown in diesel and jet growth by sparking more business investment and consumer spending, or if the economy’s soft patch lingers.
Essential reading
Jet fuel consumption has grown more slowly than anticipated so far this year owing to sluggish growth in the United States and China. Aviation accounts for about 7% of global oil demand and was widely expected to be a pillar of growth this year as travel continued to rebound from the pandemic. But jet consumption is sensitive to the state of the economy. Consumer travel demand and air freight are softening and new aircraft are much more fuel efficient.
U.S. shale firms continue to grow production using fewer rigs by focusing on improved drilling and fracking efficiency. Producers are extending wells to as much as three miles, squeezing more wells onto a single drilling pad and fracking several wells at once. Consolidation had been expected to slow output growth this year with companies preoccupied with combining staff and sorting through new properties. But the benefits of being able to extend wells into adjacent areas have boosted productivity.
Ultra-high pressure oil wells are getting more focus from oil majors with deployment of new technology and drill ships able to cope safely with the enormous forces involved. Exploiting deep sea wells with extreme pressures could enable recovery of an extra 2 billion barrels from the U.S. Gulf of Mexico.
Norway’s investment in oil and gas is set to hit a record high in 2024 and stay elevated in 2025, driven by infield developments, rapid cost increases and currency deprecation. Persistently high oil prices have led companies to drill more wells at existing fields, potentially speeding up production.
West Texas is experiencing an increase in leaks and blowouts from plugged oil wells, many of them “orphans” with no identifiable owner. Campaigners blame poor-quality plugging work as well as rising subsurface pressures stemming from increased wastewater injection.
Bangladesh’s electricity consumption has continued to surge despite social unrest that has hit industrial output. The country has experienced the fastest consumption growth over the last decade among countries with a population of more than 100 million. In contrast to other fast-growing economies, the increase in power use is being driven mostly by households rather than industry turning to air-conditioning to cope with increasingly extreme heatwaves.
Europe’s electric vehicleresale prices have fallen much faster than anticipated and faster than for combustion vehicles, hitting the financial model relied on by leasing companies. Given the high upfront costs, most EVs are leased by fleet operators then resold into the consumer market. But exceptionally rapid depreciation risks making the model unviable and threatens wider EV deployment.
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Editing by Marguerita Choy
Τελευταία νέα
Δήλωση αποποίησης ευθύνης: Οι οντότητες του ομίλου XM Group παρέχουν υπηρεσίες σε βάση εκτέλεσης μόνο και η πρόσβαση στην ηλεκτρονική πλατφόρμα συναλλαγών μας που επιτρέπει στον ενδιαφερόμενο να δει ή/και να χρησιμοποιήσει το περιεχόμενο που είναι διαθέσιμο στην ιστοσελίδα μας ή μέσω αυτής, δε διαφοροποιεί ούτε επεκτείνει αυτές τις υπηρεσίες πέραν αυτού ούτε προορίζεται για κάτι τέτοιο. Η εν λόγω πρόσβαση και χρήση υπόκεινται σε: (i) Όρους και προϋποθέσεις, (ii) Προειδοποιήσεις κινδύνου και (iii) Πλήρη δήλωση αποποίησης ευθύνης. Ως εκ τούτου, το περιεχόμενο αυτό παρέχεται μόνο ως γενική πληροφόρηση. Λάβετε ιδιαιτέρως υπόψη σας ότι τα περιεχόμενα της ηλεκτρονικής πλατφόρμας συναλλαγών μας δεν αποτελούν παρότρυνση, ούτε προσφορά για να προβείτε σε οποιεσδήποτε συναλλαγές στις χρηματοπιστωτικές αγορές. Η πραγματοποίηση συναλλαγών στις χρηματοπιστωτικές αγορές ενέχει σημαντικό κίνδυνο για το κεφάλαιό σας.
Όλο το υλικό που δημοσιεύεται στην ηλεκτρονική πλατφόρμα συναλλαγών μας προορίζεται για εκπαιδευτικούς/ενημερωτικούς σκοπούς μόνο και δεν περιέχει, ούτε θα πρέπει να θεωρηθεί ότι περιέχει συμβουλές και συστάσεις χρηματοοικονομικές ή σε σχέση με φόρο επενδύσεων και την πραγματοποίηση συναλλαγών, ούτε αρχείο των τιμών διαπραγμάτευσής μας ούτε και προσφορά ή παρότρυνση για συναλλαγή οποιωνδήποτε χρηματοπιστωτικών μέσων ή ανεπιθύμητες προς εσάς προωθητικές ενέργειες.
Οποιοδήποτε περιεχόμενο τρίτων, καθώς και περιεχόμενο που εκπονείται από την ΧΜ, όπως απόψεις, ειδήσεις, έρευνα, αναλύσεις, τιμές, άλλες πληροφορίες ή σύνδεσμοι προς ιστότοπους τρίτων το οποίο περιέχεται σε αυτήν την ιστοσελίδα παρέχεται «ως έχει», ως γενικός σχολιασμός της αγοράς και δεν αποτελεί επενδυτική συμβουλή. Στον βαθμό που οποιοδήποτε περιεχόμενο ερμηνεύεται ως επενδυτική έρευνα, πρέπει να λάβετε υπόψη και να αποδεχτείτε ότι το περιεχόμενο δεν προοριζόταν και δεν έχει προετοιμαστεί σύμφωνα με τις νομικές απαιτήσεις που αποσκοπούν στην προώθηση της ανεξαρτησίας της επενδυτικής έρευνας και ως εκ τούτου, θα πρέπει να θεωρηθεί ως επικοινωνία μάρκετινγκ σύμφωνα με τους σχετικούς νόμους και κανονισμούς. Παρακαλούμε εξασφαλίστε ότι έχετε διαβάσει και κατανοήσει τη Γνωστοποίησή μας περί Μη ανεξάρτητης επενδυτικής έρευνας και την Προειδοποίηση ρίσκου όσον αφορά τις παραπάνω πληροφορίες, τις οποίες μπορείτε να βρείτε εδώ.
