Fundamental Supply, Demand Backdrop for Oil is Soft, BofA Warns

by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

The fundamental supply/demand backdrop for oil is soft, a BofA Global Research report sent to Rigzone by the BofA team on Monday warned.

“Non-OPEC+ output is ramping up and we expect volumes to grow by ~one million barrels per day year on year in 2024 and 1.6 million barrels per day year on year in 2025 driven by Brazil, Guyana, Canada, and the United States,” the report stated.

“Meanwhile, OPEC+ is preparing to potentially bring some barrels back in 4Q24 too. Yet oil demand growth is slowing down materially as electric vehicle penetration rates ramp up in China and elsewhere, so we see global oil demand growth averaging one million barrels per day in 2024 and 1.1 million barrels per day in 2025,” it added.

“With the global oil market set for a 700,000 barrel per day surplus in 2025, total commercial and even strategic oil inventories could build significantly,” the report continued.

A chart included in the BofA Global Research report showed that the company is projecting that the Brent crude oil price will average $86 per barrel in 2024 and $80 per barrel in 2025.

Demand Forecasts

In a report sent to Rigzone last week by Standard Chartered Bank Commodities Research Head Paul Horsnell, analysts at the bank, including Horsnell, noted that “forecasts of 2024 global oil demand growth remain well apart” but added that they “have moved a little closer in the latest round of monthly reports by the three main international and national statistical agencies”.

“The forecasts range from the International Energy Agency’s (IEA) 970,000 barrels per day up to the OPEC Secretariat’s 2.112 million barrels per day; in between those extremes the Energy Information Administration (EIA) forecast is 1.143 million barrels per day and our own is 1.559 million barrels per day,” they added.

In that report, the Standard Chartered analysts noted that demand growth has averaged 1.1 million barrels per day over the past 20 years and highlighted that the median has been 1.6 million barrels per day.

“All bar the IEA are above the 20-year average and the EIA and OPEC Secretariat forecasts are above the 20-year median,” the analysts highlighted in the report.

“There is also no marked slowdown; the EIA sees growth accelerating by 460,000 barrels per day in 2025 relative to 2024, the IEA expects a slowdown of 17,000 barrels per day, we expect a slowdown of 221,000 barrels per day and the OPEC Secretariat expects a slowdown of 338,000 barrels per day,” they added.

“The average of the agency forecasts is 1.41 million barrels per day in 2024 and 1.455 million barrels per day in 2025,” they continued.

Crude Oil Futures Continue to Point Lower

In a market comment sent to Rigzone today, Li Xing Gan, a Financial Markets Strategist at Exness, said “crude oil futures continue to point lower due to persistent weak demand from China”.

“In July, China’s crude oil imports from Russia fell by 7.4 percent year on year, driven by sluggish domestic fuel demand and slower economic growth. This marked the lowest level since September 2022, as the ongoing property crisis weighs on the Chinese economy,” Gan added.

“In the geopolitical arena, recent ceasefire talks between Israel and Hamas have eased some supply concerns, but ongoing tensions in the Middle East continue to pose risks,” Gan continued.

Gan also noted in the comment that anticipated Fed rate cuts in September could boost oil demand. The strategist added that the market is closely monitoring the upcoming EIA U.S. crude oil inventories report.

“The previous report, covering the week ending August 9, showed an unexpected increase of 1.357 million barrels, halting a six-week decline and defying forecasts of a 1.9 million barrel drop,” Gan highlighted.

“Should inventories continue to rise for the week ending August 16, crude prices could face additional pressure,” Gan added.

by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas