Global Oil Demand Hits New Record High
Despite sensationalistic projections that oil demand could peak soon — which is one factor making the oil markets skittish — global demand growth for crude oil remains high. That’s been consistently shown by the International Energy Agency, and this week it was confirmed with the release of the BP Statistical Review of World Energy 2017. In fact, the report shows that oil demand has never been higher than it is today.
For readers who don’t know, I consider the BP Statistical Review to be the bible of energy statistics. The report provides a comprehensive picture of supply and demand for fossil fuels, nuclear power, and renewables on a country-level basis. I view it as the best source of energy information that is widely available to the public, and after each year’s release in June, I spend a lot of time creating graphics for use in future articles.
As always, in upcoming issues of The Energy Strategist, I will explain the global energy picture graphically using data from the report, and take a deep dive into what the numbers mean. Today, I want to focus briefly on one category — global demand for oil.
Over the past ten years, global demand for oil has increased by 10.8 million barrels per day (BPD). The average annual increase over that time was 1.1 million BPD. Last year’s increase of 1.6 million BPD was the 3rd largest increase of the decade:
The growth of crude oil demand has been remarkably consistent since the early 1980’s. You can draw a pretty straight line through demand growth from ~1983 through 2016.
So if the demand side is so robust, what’s wrong with oil prices? As it so happens, the production side has been even stronger, and that has led to record high inventories around the world.
Speaking of inventories, this week has been like deja vu all over again. A week ago the American Petroleum Institute (API) reported a significant crude oil inventory drop (bullish news), before the Wednesday release of the EIA’s Petroleum Status Report. But then the EIA report contradicted the API and reported a crude oil storage build of 3.3 million barrels. The bearish EIA report then drove crude prices down by 5%, and along with it the entire energy sector.
This week, the API reported a surprise crude oil build of 2.8 million barrels, and oil sold off. Then on Wednesday, the EIA reported a crude oil drop of 1.7 million barrels, but a gasoline inventory increase of 2.1 million barrels. Both of these numbers were interpreted as bearish, because a larger crude oil drop was expected, and the gasoline build fans fears of weakening demand at the start of summer driving season. Once again, oil prices fell by 4%.
The oil markets are so skittish that any bearish signs on inventories have consistently trumped any bullish inventory news. That happened last week, it happened this week, and it will probably be the status quo until crude inventories make consistent and significant moves back down toward historical averages. The market in recent months has been such that five consecutive declines in inventories can be overshadowed by one small increase, but that’s the world we live in at the moment.