After OPEC's September report on the state of the global oil market, a similar one was published yesterday by the International Energy Agency (IEA). This report confirms the slowdown in global demand for crude and oil products, which will put downward pressure on the prices in the medium term.
Here are some excerpts from the IEA report:
“Global oil demand growth is slowing sharply from its post-pandemic rates, as already forecast before. Reported monthly data covering 80% of global oil demand for the first half of 2024 confirm the steep decline in the rate of growth in oil consumption, which we have been projecting since our first forecast for 2024 was published in June 2023. Demand rose by 800,000 barrels per day (bpd) year-on-year in the first half of the year, dramatically lower than the growth of 2.3 million bpd recorded in 2023, but close to our initial forecast. Generally, for the year, global oil demand is on course to increase by 900,000 bpd in 2024 and 950,000 bpd next year.
The recent slowdown in China has seen its oil consumption declining year-on-year for a 4th consecutive month in July, by 280,000 bpd. This is in sharp contrast to the average growth rate of 1,000 bpd over the previous 12 months or the 1,500-bpd surge in 2023 after COVID. The country’s oil demand is now set to expand by only 180,000 bpd in 2024, as the broad-based economic slowdown and an accelerating substitution away from oil in favor of alternative fuels weigh on consumption. Surging sales of electric vehicles (EV) are reducing road fuel demand while the development of a vast national high-speed rail network is limiting growth in domestic air travel.
Outside of China, oil demand growth is tepid at best. Latest data for the US point to a steep decline in gasoline deliveries in June, following an unexpected rise in May. Thus, gasoline use in the world’s largest oil consumer declined year-on-year in five out of the first six months of the year. Structural headwinds and anemic economic growth mean that deliveries continue to contract in a number of advanced economies. This could leave advanced economies’ oil use this year nearly 2 million bpd below its pre-pandemic level. As oil demand growth seems to be weakening in China and most other countries are seeing only modest increases or drops, current trends reinforce our expectation that global demand will plateau by the end of this decade.”
These excerpts are quite enough to suggest that the oil market, for Brent as well, will be mostly bearish, at least until the end of this year.
The report's release is likely to give additional momentum to the decline in Brent prices over the next few days.
The overall recommendation is to sell Brent.
Profits should be taken at the level of 69.0. A Stop loss could be set at the level of 74.0.
The possible loss should not exceed 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
