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
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔
