On Wednesday, OPEC released its latest Monthly Oil Market Report (MOMR) wherein it stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025, citing resilient economic growth and a strong rebound in air travel in the summer months. OPEC sees global oil demand rising by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025, virtually unchanged from its January forecasts. Unfortunately, other energy agencies have not been quite as consistent, with views on 2024 global oil demand growth moving further apart in recent months. On the same day that OPEC published its report, Standard Chartered released its weekly commodity outlook while the U.S. Energy Information Administration released its Short-Term Energy Outlook (STEO). According to Standard Chartered, May oil demand growth clocked in at a robust 1.787 mb/d Y/Y; in sharp contrast, the EIA has reported May growth came in at just 0.147 mb/d Y/Y. Further, StanChart sees 2024 demand peaking at 104.37 mb/d in August whereas the EIA has predicted that demand will accelerate to 2.083 mb/d in December, reaching an all-time high of 105.03 mb/d in the final month of the year. In other words, StanChart thinks global oil demand is already strong and will decelerate to a more sustainable pace as the months roll on whereas the EIA thinks oil demand growth is weak but will strengthen in coming months. Traders will be waiting for the International Energy Agency (IEA) to release its Oil Market Report (OMR) on July 11 to try and build a clearer picture of the oil demand outlook. Oil prices have pulled back sharply over the past week with front-month Brent futures falling to $85/bbl after toying with $90. However, StanChart says the upwards trend remains unbroken, with the move lower primarily due to short-term profit taking, as well as bearish technicals. A week ago, StanChart projected that global oil markets will record a deficit in Q3 that would spill over into Q4, putting further downward pressure on inventories. StanChart notes that oil market sentiment turned extremely bearish in April with speculative funds moving rapidly to the short side of the market. This negative sentiment shift was largely driven by weak U.S. transport fuel demand as per reports by the Energy Information Administration (EIA) weekly data. Media houses did not help with the narrative, with some talking about multi-decade demand-lows and predicting an imminent collapse of the U.S. economy. To wit, the EIA estimated that U.S. gasoline demand declined 4.4% Y/Y in April, triggering a rapid pivot by speculative funds towards the short side of the market. However, StanChart quickly pointed out that there appears to be a systemic downwards bias in estimates of U.S. fuel demand, with actual gasoline demand exceeding estimates in 22 of the past 24 months, while distillate demand (mainly diesel) has been revised higher in all of the past 24 months. StanChart predicted that EIA estimates for April gasoline demand were too low with actual demand likely to surprise to the upside. StanChart was recently vindicated, with April gasoline demand turning out to be at a two-month low rather than a two-decade low. On 28 June, the EIA published its Petroleum Supply Monthly (PSM) Report that contained large upward revisions for gasoline, distillates (mainly diesel) and jet fuel. The y/y demand changes were revised to -1.5% from -4.1% for gasoline, to -2.0% from -9.2% for distillates and to +5.4% from -1.0% for jet fuel. StanChart notes that the combined upward revision in transport fuel demand clocked in at 602 thousand barrels per day (kb/d), exceeding the upward revisions of 547 kb/d and 487 kb/d made to the initial September and November 2023 data, respectively.
