Tuesday, July 26, 2016

Peak Oil (Demand) Front Update.

In a previous post on this subject, I posted a graph that indicated global oil demand will reach a new peak at the end of 2016, as well as supply. But now the blog Zero Hedge and the mainstream medium Bloomberg indicate that oil demand at least in the USA will drop this September and won't fully recover its summer peak.

First, from the credible mainstream source.

USA Oil Demand of previous years a good guideline to predict same for the remainder of 2016
Source: EIA via Bloomberg.
Oil Bulls Headed Over Demand Cliff as Refinery Shutdowns Loom - Bloomberg.
Beware, oil bulls: Just as U.S. oil production sinks low enough to drain supplies, demand is about to fall off a cliff. American gasoline consumption typically ebbs in August and September as vacationers return home, and refiners use that dip to shut for seasonal maintenance. Over the past five years, refiners’ thirst for oil has dropped an average of 1.2 million barrels a day from July to October. “People are looking ahead to the fall and are worried,” said Michael Lynch, president of Strategic Energy & Economic Research. “There’s more and more talk of prices going south of $40 and as a result people are going short.” Money managers added the most bets in a year on falling WTI crude prices during the week ended July 19, according to Commodity Futures Trading Commission data. 
That pulled their net-long position to the lowest since March. WTI dropped 4.6% to $44.65 a barrel in the report week and traded at $44.14 at 11:53 a.m. Singapore time on Monday. With weekly Energy Information Administration data showing U.S. gasoline stockpiles at the highest seasonal level since at least 1990, refiners may shut sooner and for longer ahead of the Labor Day holiday in early September, the end of the driving season. “With gasoline supplies the highest since April, refiners may pull some projects forward,” said Tim Evans at Citi Futures Perspective. “This will take more support away the market and add to the broader problem of excess supply.
There's a video at the same Bloomberg article which shows that Oil Hovers Near Two-Month Lows on Weight of Fundamentals. For more, click here.

Now the blog.

Peak Oil 'Demand' & The Duelling Narratives Of Energy Inventories - Tyler Durden, Zero Hedge.
Crude oil inventories in the U.S. have fallen 23.9 million barrels since the end of April, but, as Bloomberg notes, oil bulls counting on further declines are fighting history. Over the past five years refiners’ crude demand has fallen an average of 1.2 million barrels a day from the peak in July to the low in October. “The rough part will be once refineries start going into maintenance,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management. “We aren’t drawing down inventories very fast and the pressure on prices will increase.
For more, click here.

You see, both are in agreement about what is going to happen to oil demand this autumn -- since the kids will be going back to school and the adults, back to work. No more driving all over the countryside while on vacation.

And the latest? The supports just got kicked out of the oil price. Again. Down to $42.00 a barrel for West Texas Intermediate Crude today. How low will the price go? And will Wall Street and other financial and venture capital concerns lend more money to improve technology to get even more oil out once the price stabilizes and starts to increase if and when demand outstrips supply again?

And will global demand reach a new peak in 2017? That's a big question since a lot of people are talking up a new recession coming soon, later this year or in 2017. For more info on the economic front, The Automatic Earth is a good source aggregator.

Hat tip to Raúl Ilargi Meijer of The Automatic Earth.

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