IEA Expects Global Oil Demand to Slow Down

Show Transcript
Bloomberg Dec 15, 2023 14:43 · 6383 Views

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more

Transcript

  • 00:00 How much has this underpinned the disinflation, this idea
  • 00:04 that for whatever reason, commodity prices are going down even though demand isn't falling off a Cliff?
  • 00:11 Yeah, it's it's been quite a trend and as you say, Lisa, quite a surprising trend that we've seen the oil prices
  • 00:17 come off.
  • 00:18 And clearly many policy makers would have been delighted to see it.
  • 00:21 I mean, there's been a huge focus of the Biden administration and they
  • 00:25 will be very comfortable to see oil prices
  • 00:28 back down where they are today.
  • 00:30 I mean, the question really is
  • 00:32 what happens next?
  • 00:33 And I think there's a a
  • 00:34 certain amount of disagreement then.
  • 00:36 Well, I haven't really read through the IEA's expectation for oil demand in 2024, but obviously it's lower in terms of, well, it's 50% lower in terms of growth.
  • 00:45 So 1.1 million barrels a day growth next year versus 2.3 today.
  • 00:49 What's driving the downshift in growth?
  • 00:52 What regions is this China?
  • 00:55 Yeah, it is a China story that because
  • 00:57 the
  • 00:58 very strong number and over 2,000,000 barrels a day is a very, very strong annual
  • 01:02 growth is really driven by the fact that China was the last
  • 01:05 major market to emerge from COVID lockdowns and there was a real spring back that juiced
  • 01:11 oil demand more than you would typically expect.
  • 01:13 The 1.1
  • 01:14 million barrels a day that we're going to see next year according to Gia
  • 01:17 is by historical span has a very, very healthy number.
  • 01:20 And interestingly,
  • 01:22 although they were pretty downbeat on oil demand in
  • 01:25 the current period in the last quarter of this year,
  • 01:28 they slightly revised up their expectations to demand growth next year,
  • 01:32 showing that, you know, despite all the economics uncertainties,
  • 01:37 demand does remain fairly strong.
  • 01:40 So, you know, will take me through this.
  • 01:41 You know, production cuts will see OpEx Plus's share of global oil supply fall to its lowest since that since OPEC plus was first, you know,
  • 01:49 created
  • 01:50 like 7 years ago.
  • 01:50 Yet
  • 01:51 I'm seeing pictures of, you know, bro, handshakes between, you know, Putin and MBS.
  • 01:54 You know, talk to me about Saudi Arabia's Vision 2030 initiative.
  • 01:58 I mean, can they afford
  • 02:00 these production cuts?
  • 02:01 I mean, how long can they last?
  • 02:02 And will they try to increase production in lieu of the current state of oil prices?
  • 02:07 We,
  • 02:08 we spoke with the Saudi energy minister a couple of weeks ago and he was very firm in his belief
  • 02:13 that the action they took at the last OPEC meeting will be enough
  • 02:16 to rebalance the market.
  • 02:17 So they'd look long and harder, what the surplus looked like in the first part of this year
  • 02:22 and the
  • 02:23 cuts that they can deliver.
  • 02:25 The additional cuts they can deliver
  • 02:26 will bring the
  • 02:27 market back into balance, moreover.
  • 02:30 He's seen those willingness to keep
  • 02:31 that's in place beyond the first quarter
  • 02:34 if they need it Now you make an important point, however, which is they are losing market share.
  • 02:39 And one of the most interesting things about the oil market this year, which has surprised people
  • 02:44 is the strength of supply growth from America, from the shale industry.
  • 02:47 The sale industry
  • 02:48 has shown itself to be remarkably resilient, and when people expected it to slow, it hasn't slowed as much as possible.
  • 02:55 Whether they can sustain that next year
  • 02:57 will be fascinating to see.
  • 02:59 It's always the most important,
  • 03:01 One of the most important things to look at when you understand the oil market
  • 03:04 and clearly there's a risk for OPEC there, is that you get into a vicious cycle where you reduce production
  • 03:10 to keep prices high, and those high prices could encourage more production from shale.
  • 03:15 And so you keep stepping back on market share.
  • 03:17 And that's something that happened
  • 03:19 almost 10 years ago where ultimately OPEC had to
  • 03:22 open the taps.
  • 03:23 Now I don't think
  • 03:24 talking to Saudi Arabia, they want to do that again at this stage,
  • 03:27 but there is clearly that danger.
  • 03:30 But
  • 03:30 their hope is these cuts and the additional cuts will be enough to bring the market back into balance and see prices rise.