Over The Barrel - Focus on Demand Prospects
Introduction
Having moved past the OPEC meeting, crude supply prospects appear to be largely discounted. In the absence of fresh supply disruptions from weather or political considerations, the market will be increasingly responsive to demand coming in above or below forecast.
Although the crude oil outlook continues to point to an expansion in demand with little risk from the sub prime credit crisis, global growth prospects will still play an important role as we move into 2008. Weather will also be a key consideration to the outlook into the 1st quarter. A warmer or colder than normal winter could have a tremendous impact on prices as seen a year ago when a warmer than expected Northern Hemisphere winter put pronounced pressure on values at a time when OPEC was over-producing.
Demand Outlook
Demand for the remainder of 2007 looks poised to reach as high as 87.8 mb/d compared to 85.4 mb/d in the 4th quarter of 2006. The demand level is expected to exceed prevailing production by as much as 1.4 mb/d. The forecast deficit has been the preeminent factor behind the dramatic price run up toward 83.00 recently in the nearby contract.
Global Oil Demand | |||||||
million barrels per day | |||||||
|
|
|
|
|
|
| 4th Qtr |
| 2005 | 2006 | 2007 | 2008 | 4th Q 06 | 4th Q 07 | % Chg |
Total Demand | 83.6 | 84.7 | 85.9 | 88.0 | 85.4 | 87.9 | 2.93% |
Africa | 2.9 | 2.9 | 3.1 | 3.2 | 2.9 | 3.1 | 6.90% |
Americas | 30.6 | 30.6 | 31.1 | 31.6 | 30.7 | 31.4 | 2.28% |
Asia/Pacific | 24.0 | 24.5 | 25.1 | 25.9 | 24.8 | 25.8 | 4.03% |
Europe | 16.2 | 16.2 | 16.1 | 16.4 | 16.4 | 16.6 | 1.22% |
FSU | 3.8 | 4.0 | 3.9 | 4.0 | 4.3 | 4.5 | 4.65% |
Middle East | 6.1 | 6.5 | 6.6 | 6.9 | 6.3 | 6.5 | 3.17% |
|
|
|
|
|
|
|
|
OECD | 49.7 | 49.2 | 49.4 | 50.2 | 49.7 | 50.6 | 1.81% |
Non-OECD | 34.1 | 35.3 | 36.5 | 37.8 | 35.7 | 37.3 | 4.20% |
Key to the price outlook will be the following:
- North and South American demand, which is forecast to record a 2.3 percent increase to 31.1 mb/d. U.S. demand could be scaled back if weather is warmer than normal, or economic growth is curtailed further than currently envisioned.
- Asian Pacific demand is forecast to reach 25.8 mb/d compared to 24.8 mb/d in the 4th quarter of 2006. Although it is hard to envision that demand will fall short of forecast, it might be boosted above the forecast level as China and India continue to record strong growth above expectations.
- European economies appear to be showing signs of slowing growth. Given the recent weakness in deliveries of fuel oil and heating oil the region might fall short of their prospective forecast rate of 16.6 mb/d, particularly if weather proves warmer than normal.
Questions or comments on Over the Barrel, please contact Steve Platt at 1.877.377.7931 or Stephen.Platt@archerfinancials.com.
The information and comments contained herein are provided as general commentary of market conditions and are not and should not be interpreted as trading advice or recommendation. The information and comments contained herein are not and should not be interpreted to be predictive of any future market event or condition. The information and comments contained herein is provided by ADM Investor Services, Inc. and not Archer Daniels Midland Company. Copyright © ADM Investor Services, Inc.
Charts Courtesy of DTN
