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Crisis in Venezuela, sanctions against Iran, breakdowns in Libya, production cuts from the Organization of Petroleum Exporting Countries (OPEC), Russia, and yet, no panic on the crude markets.
The reaction of the market to all this has been lukewarm to say the least. Prices remained stable and fell over the weeks.
Nick Cunningham, Oilprice.com, points out that the warm price movements of the last two weeks are rather surprising given the tightening of supply.
The reductions in Opec + are taking effect and US data is starting to reflect these changing market conditions.
Still, the desired results are still not there. The short and long-term gross horizons continue to present a gloomy picture.
Concerns about growing demand are now beginning to weigh on the spirit of the market. It remains to be seen whether demand will increase enough to absorb the growing gross world output.
Global economic growth is slowing. Data from Chinese factories show signs of contraction. In 2018, China's GDP grew at its slowest pace in decades.
Last month, manufacturing activity in China contracted for the second month in a row.
The ongoing Sino-US trade war is also a source of concern. Chinese oil demand accounts for more than 12% of total world demand. If China slows down, growth in global demand for oil will also be reflected.
And while all this is happening, the supply side of the overall crude equation continues to look strong. This is a double disadvantage for the overall global equation.
In his State of the Union address, President Trump extolled the growing American eminence in the world of energy: "We have unleashed a revolution in the US energy sector: the United States is now the world's largest producer of oil and natural gas.
And now, for the first time in 65 years, we are a net exporter of energy, "said Trump.
Trump had a point. The shale revolution in the United States has changed the global dynamics of crude oil.
In the long run too, the scenario is bleak.
According to reports, growth in oil demand is expected to be zero in the next 10 years. According to Bank of America Merill Lynch (BofAML), world demand for crude oil peaked around 2030, then a period of rapid decline.
Over the next decade or so, oil demand is expected to continue to grow although, at a slower pace, the bank pointed out.
By 2024, the growth in world demand for crude oil will decline by half to just 0.6 million barrels per day (bpd), compared with 1.2 mbd / d this year.
But by 2030, growth in demand will be zero, consumption reaching a permanent peak, before falling at a relatively rapid rate thereafter, the report said.
The main demand factor is the proliferation of electric vehicles. We are at the heart of the "biggest structural change in the growth of demand since the beginning of the proliferation of the car in the early 1900s," said the BofAML report.
China, the world leader in car sales, has already made a major advance in electric vehicles.
India also lobbied in the electric vehicle sector.
"Electric vehicles will be the main driver of structural change in oil demand trends over the next five years and beyond," BofAML said, adding that electric vehicles will have a "significant negative impact" on demand. of oil from 2021.
Electric vehicle sales are growing rapidly around, as the number of electric vehicles on the roads increases rapidly. Automakers are about to roll out dozens of new models, expanding choice and notoriety, while advancing price, range and performance.
By 2020, electric vehicles will account for 5% of global vehicle sales, which will rise to 40% by 2030, before reaching 95% by 2050.
All of this implies a peak in oil demand by 2030.
"Electric vehicles are diverting the demand for gasoline, IMO is driving the shift to diesel, and the strong growth in petrochemical demand is displacing demand towards the light part of the barrel, including NGLs in particular," wrote BofAML.
Opec and its allies are aware of this. In order to meet the growing challenge, key OPEC members, including Saudi Arabia and the United Arab Emirates, are trying to coerce their allies (non-OPEC members) to a few years of coordination. markets, the Wall Street Journal reported.
They want Russia and other oil producing countries to continue to manage supply for another three years. Some of the nations are expected to debate the proposal at their meeting in Vienna later this month.
The raw world is about to undergo radical change and metamorphosis.
Posted in Dawn, February 10, 2019
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