Released January 14, 2022 | SUGAR LAND
en
Written by Geoffrey S. Lakings for Industrial Info Resources (Sugar Land, Texas)--
Last week, we asked of ourselves, "Surplus. Not Surplus. 'Tis the question market participants seek to have answered."
Now we turn our eyes to "Will there be the demand growth expected," for the U.S. Energy Information Administration (EIA) EIA indicates in its latest Short Term Energy Outlook (STEO) that it expects supply growth will exceed demand.
OilPrice: EIA Sees Oil Prices Dropping In 2022, 2023
Global inventory builds due to supply growth outpacing demand increases will pressure oil prices down this year and next, the (EIA) said in its (STEO) for January.
Brent Crude prices, which averaged $79 a barrel in the fourth quarter of 2021, are set to average $75 per barrel during 2022 and $68 a barrel in 2023, the EIA said.
The U.S. benchmark, WTI Crude, is expected to average $71.32 per barrel this year and $63.50 a barrel next year, the EIA said in its monthly outlook.
Early on Wednesday, before EIA's weekly inventory report, WTI Crude was trading above $82, and Brent Crude was above $84 a barrel, after Fed Chair Jerome Powell said on Tuesday that the U.S. economy would see only a "short-lived" impact from the Omicron surge, and was ready for the beginning of monetary policy tightening.
According to EIA's estimates, inventory withdrawals globally averaged 1.4 million barrels per day (BBL/d) last year, thanks to faster demand growth than supply increases. This year, however, demand growth is set to slow while supply will grow faster, leading to builds in global petroleum inventories.
The world's oil production is set to jump by 5.5 million BBL/d in 2022, driven by production increases in the U.S., OPEC and Russia, which together will account for 84%, or 4.6 million bpd, of the growth, the EIA said. At the same time, global petroleum consumption will increase by 3.6 million BBL/d in 2022, the administration noted.
And because these are uncertain markets in uncertain times, it is no surprise that the EIA, the International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC) each have different outlooks for 2022. Because, well, why would we expect any different?
World Oil: OPEC, EIA, IEA each have different 2022 oil demand forecasts
"Oil forecasters have parted company on their views about demand in the coming months, as the omicron variant of the COVID-19 virus spreads rapidly around the world. And producers have emerged as the surprising bulls in the latest round of estimates.
The IEA, the U.S. EIA and OPEC all have updated their oil market forecasts for the period through the end of next year. Each is trying to get to grips with the impact of the latest coronavirus strain, identified only in late November and already accounting for 20% of confirmed cases in England.
One change stands out: Their view of oil demand in the first quarter of 2022. While rising case numbers and international travel restrictions have led the IEA and EIA to cut their estimates of consumption through March, OPEC is on a very different path. Its forecast for the current quarter remains unchanged from the one it published a month ago, while its outlook for the start of 2022 has been revised upward by 1.1 million barrels a day."
And for the moment, Mr. Market is of the opinion that demand will outweigh surplus, which seemingly cannot be brought to the markets.
New York Times: Oil Producers Aren't Keeping Up With Demand, Causing Prices to Stay High; OPEC+, the United States and others have been slow to ramp up output, lagging production goals.
But because nothing can be straightforward, Reuters reports that oil edges lower on profit-taking, rate hike worries.
While earlier this week -- in IIR's Crude & Products Market Scorecard -- it was noted that yes, we are in uncertain times; and granted, we need to understand market fundamentals and the financial markets; however, one cannot forget geopolitical flashpoints are unfolding as well:
"Market Scorecard Overview: Uncertain Times. The world already was avidly watching the tension on the Russia-Ukraine border as the EU steps in to de-escalate such; now more flashpoints are arising in both Kazakhstan and Libya with yet more to come -- think China's machinations on the South China Sea -- throughout the world. And, still one cannot discount omicron and its impact -- even if most market pundits speak to a muted impact -- on hydrocarbon demand. Not to mention the EU and Asia continue to wrestle with the unfolding energy crunch and crisis, especially in regard to natural gas pricing and what this will entail for their respective economies."
And this brings us back stateside, where like the EIA, IEA and OPEC, we hear of differing fundamentals. In the states it is about "weak demand" as gasoline inventories continue to surge; but wait a minute, in the world, the word on the street is demand is rising. What is the truth? This as crude inventories draw blows away expectations. What gives? Seems like seasonality, if one looks at the trends in the charts. And it is worth noting that both crude runs and refinery utilizations are below the five-year average.
Reuters: U.S. crude stockpiles fall to 2018 lows, gasoline inventories surge - EIA
"U.S. crude oil stockpiles fell more than expected to their lowest levels since October 2018, but gasoline inventories surged due to weak demand, the EIA said on Wednesday.
Crude inventories fell by 4.6 million barrels in the week to January 7 to 413.3 million barrels, compared with analysts' expectations in a Reuters poll for a 1.9 million-barrel drop.
U.S. crude inventories have dropped for seven consecutive weeks, and overall inventories have been tightening across the globe as major producers struggle to increase supply even as demand rises.
Click on the image at right for the EIA Weekly Crude Inventory Survey.
And click on this image at right for Fundamental Analytics' comments on the EIA Weekly Petroleum Status Report.
IIR/DOE Weekly Refinery Report for the Week Ending on January 7th, 2022
Crude oil continued its bull run, with West Texas Intermediate gaining about $5 per barrel in the last week. Supportive Congressional testimony from Fed Chairman Jerome Powell, coupled with growing evidence that the Omicron variant is less severe than the Delta variant and OPEC+'s inability to meet its production quotas for December, were seen as the reasons for the surge. The World Bank lowered its estimates for gross domestic product (GDP) growth for the U.S. and the world, which could reduce demand for refined oil products. The bank cut its estimate for U.S. GDP 1.2 percentage points, to 5.6%, for 2021. The outlook for U.S. economic growth also softened for 2022 and 2023, where the bank predicted that growth would slow to 3.7% in 2022 and 2.6% in 2023. In its monthly Short-term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) predicted that U.S. crude oil production would average of 12.4 mbd in 2023, exceeding by 100 kbd its pre-pandemic record of 12.3 mbd. On the demand side, the EIA increased its 2022 demand estimate by 140 kbd, from 700 kbd to 840 kbd. Against this backdrop, crude oil reserves fell ▼4.6 million barrels to 413.3 million barrels, the DOE reported this morning. So again, welcome to the New Year and all that it portends. What we can say for certain is this will be a year of uncertainty with volatility in the markets as the world continues to strive to recover from the COVID-19 pandemic, while focusing on stabilizing economic and commodity markets, which have been greatly impacted by this pandemic.
I leave you with this -- is your seat belt buckled for the certain Mr. Toad's Wild Ride ahead...
Seeking Alpha:Hedge fund manager Kyle Bass: Buckle your seatbelts on oil prices
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
Now we turn our eyes to "Will there be the demand growth expected," for the U.S. Energy Information Administration (EIA) EIA indicates in its latest Short Term Energy Outlook (STEO) that it expects supply growth will exceed demand.
OilPrice: EIA Sees Oil Prices Dropping In 2022, 2023
Global inventory builds due to supply growth outpacing demand increases will pressure oil prices down this year and next, the (EIA) said in its (STEO) for January.
Brent Crude prices, which averaged $79 a barrel in the fourth quarter of 2021, are set to average $75 per barrel during 2022 and $68 a barrel in 2023, the EIA said.
The U.S. benchmark, WTI Crude, is expected to average $71.32 per barrel this year and $63.50 a barrel next year, the EIA said in its monthly outlook.
Early on Wednesday, before EIA's weekly inventory report, WTI Crude was trading above $82, and Brent Crude was above $84 a barrel, after Fed Chair Jerome Powell said on Tuesday that the U.S. economy would see only a "short-lived" impact from the Omicron surge, and was ready for the beginning of monetary policy tightening.
According to EIA's estimates, inventory withdrawals globally averaged 1.4 million barrels per day (BBL/d) last year, thanks to faster demand growth than supply increases. This year, however, demand growth is set to slow while supply will grow faster, leading to builds in global petroleum inventories.
The world's oil production is set to jump by 5.5 million BBL/d in 2022, driven by production increases in the U.S., OPEC and Russia, which together will account for 84%, or 4.6 million bpd, of the growth, the EIA said. At the same time, global petroleum consumption will increase by 3.6 million BBL/d in 2022, the administration noted.
And because these are uncertain markets in uncertain times, it is no surprise that the EIA, the International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC) each have different outlooks for 2022. Because, well, why would we expect any different?
World Oil: OPEC, EIA, IEA each have different 2022 oil demand forecasts
"Oil forecasters have parted company on their views about demand in the coming months, as the omicron variant of the COVID-19 virus spreads rapidly around the world. And producers have emerged as the surprising bulls in the latest round of estimates.
The IEA, the U.S. EIA and OPEC all have updated their oil market forecasts for the period through the end of next year. Each is trying to get to grips with the impact of the latest coronavirus strain, identified only in late November and already accounting for 20% of confirmed cases in England.
One change stands out: Their view of oil demand in the first quarter of 2022. While rising case numbers and international travel restrictions have led the IEA and EIA to cut their estimates of consumption through March, OPEC is on a very different path. Its forecast for the current quarter remains unchanged from the one it published a month ago, while its outlook for the start of 2022 has been revised upward by 1.1 million barrels a day."
And for the moment, Mr. Market is of the opinion that demand will outweigh surplus, which seemingly cannot be brought to the markets.
New York Times: Oil Producers Aren't Keeping Up With Demand, Causing Prices to Stay High; OPEC+, the United States and others have been slow to ramp up output, lagging production goals.
But because nothing can be straightforward, Reuters reports that oil edges lower on profit-taking, rate hike worries.
While earlier this week -- in IIR's Crude & Products Market Scorecard -- it was noted that yes, we are in uncertain times; and granted, we need to understand market fundamentals and the financial markets; however, one cannot forget geopolitical flashpoints are unfolding as well:
"Market Scorecard Overview: Uncertain Times. The world already was avidly watching the tension on the Russia-Ukraine border as the EU steps in to de-escalate such; now more flashpoints are arising in both Kazakhstan and Libya with yet more to come -- think China's machinations on the South China Sea -- throughout the world. And, still one cannot discount omicron and its impact -- even if most market pundits speak to a muted impact -- on hydrocarbon demand. Not to mention the EU and Asia continue to wrestle with the unfolding energy crunch and crisis, especially in regard to natural gas pricing and what this will entail for their respective economies."
And this brings us back stateside, where like the EIA, IEA and OPEC, we hear of differing fundamentals. In the states it is about "weak demand" as gasoline inventories continue to surge; but wait a minute, in the world, the word on the street is demand is rising. What is the truth? This as crude inventories draw blows away expectations. What gives? Seems like seasonality, if one looks at the trends in the charts. And it is worth noting that both crude runs and refinery utilizations are below the five-year average.
Reuters: U.S. crude stockpiles fall to 2018 lows, gasoline inventories surge - EIA
"U.S. crude oil stockpiles fell more than expected to their lowest levels since October 2018, but gasoline inventories surged due to weak demand, the EIA said on Wednesday.
Crude inventories fell by 4.6 million barrels in the week to January 7 to 413.3 million barrels, compared with analysts' expectations in a Reuters poll for a 1.9 million-barrel drop.
U.S. crude inventories have dropped for seven consecutive weeks, and overall inventories have been tightening across the globe as major producers struggle to increase supply even as demand rises.
IIR/DOE Weekly Refinery Report for the Week Ending on January 7th, 2022
Crude oil continued its bull run, with West Texas Intermediate gaining about $5 per barrel in the last week. Supportive Congressional testimony from Fed Chairman Jerome Powell, coupled with growing evidence that the Omicron variant is less severe than the Delta variant and OPEC+'s inability to meet its production quotas for December, were seen as the reasons for the surge. The World Bank lowered its estimates for gross domestic product (GDP) growth for the U.S. and the world, which could reduce demand for refined oil products. The bank cut its estimate for U.S. GDP 1.2 percentage points, to 5.6%, for 2021. The outlook for U.S. economic growth also softened for 2022 and 2023, where the bank predicted that growth would slow to 3.7% in 2022 and 2.6% in 2023. In its monthly Short-term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) predicted that U.S. crude oil production would average of 12.4 mbd in 2023, exceeding by 100 kbd its pre-pandemic record of 12.3 mbd. On the demand side, the EIA increased its 2022 demand estimate by 140 kbd, from 700 kbd to 840 kbd. Against this backdrop, crude oil reserves fell ▼4.6 million barrels to 413.3 million barrels, the DOE reported this morning. So again, welcome to the New Year and all that it portends. What we can say for certain is this will be a year of uncertainty with volatility in the markets as the world continues to strive to recover from the COVID-19 pandemic, while focusing on stabilizing economic and commodity markets, which have been greatly impacted by this pandemic.
I leave you with this -- is your seat belt buckled for the certain Mr. Toad's Wild Ride ahead...
Seeking Alpha:Hedge fund manager Kyle Bass: Buckle your seatbelts on oil prices
- "Closely watched hedge fund manager Kyle Bass said Thursday that oil prices could rise "well north of $100" in 2022 as a lack of investment in the hydrocarbon industry meets a surge in demand as the global economy emerges from COVID restrictions.
- "I think you should buckle your seatbelts," the founder and chief investment officer of Hayman Capital Management said. "We're going to see really high prices very soon."
- Bass explained that policies designed to fund the development of green energy sources have pulled capital away from oil development. As a result, the industry will not have enough capacity to keep up with demand as the COVID impact fades.
- "You can't just turn off hydrocarbons. It takes 40 or 50 years to switch fuel sources," he said.
- Looking at the broader market, Bass predicted that the Federal Reserve might not be able to raise interest rates as quickly as it needs to because doing so would trigger a massive correction in the stock market."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
