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By Julian Lee
The world’s three big oil agencies update their forecasts this week. Demand will be in the spotlight, with traders weighing a worsening economic outlook against limited spare production capacity and looming European Union sanctions on Russian exports. I’m expecting another downward revision to oil consumption forecasts.
The US Energy Information Administration updates its short-term outlook Tuesday, followed by new estimates from the International Energy Agency and the Organization of Petroleum Exporting Countries on Thursday.
Back in February, the month when the IEA’s consumption forecast for this year was at its peak, the three agencies saw demand averaging a bit above 100.5 million barrels a day. OPEC, which has been more optimistic on demand than its consumer-side counterparts all year, is the only one still expecting global oil demand to be in triple digits this year, but it’s always slower than the others to change its outlook.
Crude prices have fallen by about $12.50 a barrel, or 12%, since the analysts were compiling their previous demand outlooks. But, in contrast to what a lot of forecasters still use in their models, that’s not the price that affects demand. As a driver, what I care about is the price at the pump, not the one on a futures exchange. And for many buyers, pump prices haven’t come down anything like as quickly as those for crude.
Motorists in the US have seen the prices they pay for gasoline fall at a similar rate to crude, as have most countries in the euro zone. But those in the UK have seen a drop of only 3%, while India’s drivers are paying the same amount they were a month ago.
Add that to fears of recession and rising prices for food, gas, electricity and almost everything else, and you have a strong catalyst for tightening belts and cutting back on discretionary spending. For many, that will mean the amount they drive. Couple that with economic slowdown, and you have a recipe for slowing oil demand growth.
The agencies’ forecasts don’t fully reflect those headwinds yet. That may change by the end of the week.
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Julian Lee is an oil strategist for Bloomberg First Word. Previously, he was a senior analyst at the Centre for Global Energy Studies. Energiesnet.com does not necessarily share these views.
Editor’s Note: This article was originally published by Bloomberg on August 8, 2022. All comments posted and published on EnergiesNet.com, do not reflect either for or against the opinion expressed in the comment as an endorsement of EnergiesNet.com or Petroleumworld.
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EnergiesNet.com 08 09 2022
