Global oil demand forecast downgrade for 2013

China Delusion

The steep slowdown in China has investors wondering: Now what? China’s slowdown now looks more and more like a crash landing, raising fears that the world's growth engine is getting bogged down by Europe and its own internal economic problems. Soaring domestic wages and real estate makes China’s trade data even more disturbing.

If China is supposed to carry the world on their manufacturing data they are not going to be able to do it if their exports increase only 1 percent over a year earlier.  That wasn’t even close to the market expectations of 5 percent.

Import growth also fell to 4.7 percent from the previous month’s 6.3 percent, raising concerns that domestic growth in China is hurting as well and the expectations that the new wealthy Chinese consumer will buy goods from the rest of the world are diminishing as well.

Is it any wonder that even the IEA lowed its global oil demand forecast for 2012 and 2013 by 300,000 to 400,000 barrels a day? The IEA says 2013 oil demand growth at 0.8 million barrels a day down from 1 million barrels a day previously. The agency also said that there would be less need for oil from their nemesis OPEC. The IEA says that the demand for OPEC oil in 2013 will increase by 0.4 million barrels a day to 30.1 million barrels a day, well within what OPEC is already pumping at 31.4 million barrels a day last month according to IEA, so unless they cut production that should be more than enough.

If you are hoping for QE or European bond buying then you should be pleased with the fact that the PPI in the UK rose at the slowest rate in two and a half years in July.  The Office for National Statistics said that producer prices rose 1.7% in July from the same month a year earlier, the weakest year-to-year rate since October 2009. Prices in month-to-month terms were flat.

Natural Gas popped then fell on confusion surrounding the Energy Information Agency report. The EIA said that working gas in storage was 3,241 Bcf as of Friday, August 3, 2012, according to EIA estimates. This represents a net increase of 24 bcf from the previous week. Stocks were 465 bcf higher than last year at this time and 386 bcf above the 5-year average of 2,855 Bcf. In the East Region, stocks were 134 bcf above the 5-year average following net injections of 30 bcf. Stocks in the Producing Region were 171 Bcf above the 5-year average of 937 bcf after a net withdrawal of 5 bcf. Stocks in the West Region were 81 bcf above the 5-year average after a net drawdown of 1 bcf. At 3,241 bcf, total working gas is above the 5-year historical range. But the surprise was that the Producing Region, for the week ending August 03, 2012, totaled 1,108 Bcf, with 226 Bcf in salt cavern facilities and 881 Bcf in non-salt cavern facilities. Working gas stocks decreased 8 Bcf in the salt cavern facilities and increased 1 Bcf in the non-salt cavern facilities since July 27.

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