Investing.com — Recent monthly reports from official energy agencies show a softer outlook for global demand, even as geopolitical tensions continue to simmer.
Brent crude prices recently fell from a high of $82 to around $80 per barrel, reflecting a temporary recovery after a broader market sell-off earlier in August, according to Citi Research analysts in a note Wednesday.
This market correction was mainly driven by escalating fears of a recession, overshadowing other potentially destabilizing factors. These include geopolitical tensions such as the Iran-Israel standoff, internal unrest in Libya and the ongoing hurricane season, which threatened supply chains until the end of the year.
The latest reports from the Energy Information Administration (EIA), the International Energy Agency (IEA) and the OPEC Secretariat indicate a more cautious outlook for oil demand growth in 2024 and 2025.
The IEA has maintained its oil demand growth forecast for both years at just under 1 million barrels per day (b/d), having already revised downwards its forecasts in June. The EIA, in its August Short-Term Energy Outlook (STEO), left its 2024 global oil demand forecast unchanged at 1.1 million b/d, but revised down its 2025 growth estimate by 0.2 million b/d due to weaker economic prospects.
On the supply side, the IEA expects significant increases in non-OPEC+ production, with an expected increase of 1.3 million barrels per day in 2024 and 1.8 million barrels per day in 2025. This growth, led by the United States, Brazil , Guyana, and Canada are expected to easily meet global oil demand over the next two years.
The IEA also predicts a shift from a shortage in the second half of 2024 to stockpiling from the first quarter of 2025, as OPEC+ starts putting additional barrels on the market.
In contrast, OPEC’s recent monthly oil market report continues to forecast tight market conditions, with an implied deficit of 1.9 million barrels per day in 2024 and 1.7 million barrels per day in 2025, despite expectations for global oil growth demand for oil has been adjusted downwards for the first time. this year.
OPEC’s higher demand base of 104.2 million barrels per day in 2024 and 106.1 million barrels per day in 2025 suggests that OPEC’s outlook remains more optimistic than that of other agencies.
Speculative positioning in the ICE Brent complex has struggled in August, with geopolitical risk rallies failing to support structurally bullish sentiment. The ratio of gross longs to gross shorts of Brent Managed Money (MM) has fallen to an all-time low, indicating a market vulnerable to shorting activity and general risk.
Implied volatility increased in August, with the difference between implied and realized volatility widening, reflecting a market that is more sensitive to sudden shifts in sentiment.
The latest weekly data from the EIA shows a mixed picture. U.S. commercial inventories increased by 1.4 million barrels to 430.7 million barrels, while gasoline and distillates inventories fell, indicating some resilience in demand for refined products.
However, gasoline demand remains below pre-pandemic levels, and jet fuel demand is still lower than 2019 figures, underscoring the challenges in achieving a full recovery in oil consumption.
Analysts at Citi Research suggest that while the immediate outlook for oil demand growth is muted, the market remains sensitive to fluctuations due to both economic and geopolitical developments.
