Bloomberg organizes in one chart some oil demand scenarios that are around from the IEA, OPEC, Exxon and BP:
But the IEA suggests another possible scenario:
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The Wall Street Journal discusses the spillover gas production expected to come from new oil production in the Permian:
“The oil-rich Permian Basin is emerging as a major source of new natural gas, a development that could deepen an existing glut and pressure gas prices for years.
The West Texas region has become the most prolific spot for horizontal oil drilling and fracking. The new oil wells also produce natural gas, making it a nearly free byproduct that energy companies can then sell on top of the more-sought-after crude…
But because Permian drillers are after oil, gas prices could hit historic lows, probably as little as $1.50 a million British thermal units, before it stopped them from drilling, according to energy consulting firm Wood Mackenzie.”+ read more
Neil Irwin of the New York Times suggests we are asking the wrong question about wages:
“Over the last 24 months through March, inflation has come in at 1.4 percent a year, and productivity growth at 0.6 percent. Those are very low numbers. And in our supersimple model, you may expect average worker wages to have risen only 2 percent.
In fact, the average hourly earnings for nonmanagerial private sector workers rose 2.4 percent a year in that period. You may not feel like cheering about that, but it’s more than we might have expected, with inflation and productivity so weak. The real mystery, then, isn’t why wages are rising so slowly, but why they’re rising so fast.”
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The underrated NYTimes business section lays out US GDP possibilities here: https://www.nytimes.com/2017/05/26/business/economy/economic-growth-gross-domestic-product.html
Economist Diane Swonk is quoted:
““We’re still on track for a 2 percent growth economy, give or take a little, but not a 3 percent economy,” said Diane Swonk, a veteran independent economist in Chicago. “It may not sound like much, but the difference is important.”
In a $17 trillion economy, it is a difference of $170 billion per year, which has major implications for corporate profits, worker pay and even the federal government’s bottom line.”
“Those two factors [aging population, low productivity]make for headwinds that are hard to overcome,” she said.”
The Times includes a chart showing how economists have mostly overestimated GDP:
The Atlanta Fed’s GDP Nowcast for 2Q is now at 3.7%:
The NY Fed’s Nowcast is a bit lower:
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“Days supply” is simply stocks divided by daily demand… It is a useful measure that puts stock levels into context with consumption… Crude oil and distillates stocks are declining relative to demand compared to last year… Gasoline is around unchanged… Here are the charts from This Week in Petroleum:
Gasoline is slightly above last year:+ read more
Here is the price chart from This Week In Petroleum:
“Gasoline demand has fallen from last year, putting further downward pressure on prices. As of May 19, the four-week average U.S. demand is 178,000 barrels per day (b/d), approximately 2%, below 2016 levels. Despite declining demand in 2017 so far, AAA (in association with IHS Markit) expects over 39 million Americans to travel this weekend, 1 million more travelers than last year and the highest travel volume since 2005.
High inventories, including finished gasoline and gasoline blending components, are also contributing to the downward pressure on gasoline prices. Gasoline inventories have been averaging near 2016 levels (near the upper bound of the five-year range), rising above last year’s levels for two weeks recently before dipping to 239.9 million barrels, slightly less than the 2016 inventory levels of 240.1 million barrels. This trend corresponds with strong refinery and blender net production of finished motor gasoline, which has been equal to or greater than 2016 4-week average levels for 10 straight weeks.”
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In the EIA’s Today in Energy:
“The net effect of these fuel economy trends is that light-duty vehicle energy consumption is projected to decrease 12%, from 16.1 quadrillion British thermal units (Btu) in 2017 to 14.2 quadrillion Btu in 2025 in the AEO2017 Reference case, despite projected growth in vehicle-miles traveled of 5% over the same period. Nearly all of this energy consumption is gasoline, with gasoline consumption by light-duty vehicles projected to fall from 8.7 million barrels per day in 2017 to 7.5 million barrels per day in 2025.”
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From The Economist:
Moreover, global demand this year has been weaker than expected. In a report this week, Roland Berger, a consultancy, argued that rich-country oil demand has peaked, and that, as developing countries such as China and India industrialise, they will use oil more efficiently than did their developed-world counterparts (see chart). All this raises doubts about how far the oil price can climb.
There is more here: http://www.economist.com/news/finance-and-economics/21722182-cartel-fighting-not-just-shale-producers-futures-market-markets+ read more
I posted an EIA piece last week showing the decline in OPEC oil revenues over the past few years… Here is Andrew Torchia, Reuters, on the Saudi budget:
“The result is likely to be that the budget deficit for 2017 comes close to Riyadh’s original projection of 198 billion riyals. Though that would be a marked improvement from last year’s 297 billion riyals, at about 8 percent of gross domestic product it would still be too high for comfort.”
“Similarly, oil prices could have a big impact on the Aramco IPO. Consultants Sanford C. Bernstein have estimated that Aramco would make a net profit of $13.30 a barrel on its upstream production with oil at $50, but $16.90 at $60.
That suggests a $10 swing in the oil price could conceivably make a difference of hundreds of millions of dollars to Aramco’s IPO valuation, helping to determine whether the government can claim it is getting a good price.”
Here is the whole story: http://www.reuters.com/article/us-oil-opec-saudi-economy-idUSKBN18I0O1+ read more
The Wall Street Journal does a nice job laying out some major oil companies’ thoughts on peak oil demand:
I could get snarky and say this won’t change traders’ views on July WTI options, but OPEC/Saudi Arabia certainly understand the risk of fossil fuels losing market share to renewables… High oil prices quicken the process…
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