Oil demand at 5-year high sparks buying frenzy

Demand Surge

Oil (NYMEX:CLF14) demand surges in the U.S. according to the Energy Information Administration (EIA) and the International Energy Agency as low prices spark a buying frenzy. Yet could a budget deal that increases the odds of an early taper temper rising demand expectations? Today we get the EIA report that will have to be compared to the American Petroleum Institute version that reported a drawdown in crude supply as refiners run wild and fog in Houston impacted the movement of supply.

It’s hard to know where to start but the market seemed to get a boost after the EIA released their Short Term Energy Outlook, which showed U.S. demand rising while OPEC production falling. The EIA said that OPEC crude-oil production hit a 2-1/2-year low in November amid output disruptions in Nigeria and Libya. At the same time they say that oil demand growth in the U.S. is at the highest level since 2010. They increased U.S. oil demand 1.1% from a month ago.  They at the same time reported that U.S. oil production will be at the highest level in 25 years, not bad.

That demand growth could be seen if you look through the fog and the American Petroleum Institute weekly numbers. Crude oil showed a shocking 7.5 million barrel draw down. While the number was inflated by fog in the Houston Shipping Channel and year-end tax considerations, you can’t dismiss the strong refinery runs.

The API shows refiners are running wild, raising utilization 1.2% to an impressive 92.7%. This led to a 6.3 million barrel build in gasoline supply and a more modest 1.2 million barrel increase in distillate inventory.

Then you had the International Energy Agency weigh in. Bloomberg reported that global oil demand in 2014 will be higher than previously forecast, after consumption in the U.S. rebounded to its strongest level in five years, the International Energy Agency said. The IEA estimated today in its monthly oil market report that demand will increase by 1.2 million barrels a day, or 1.3%, to 92.4 million a day next year, raising its projection from last month by 240,000 a day. U.S. fuel use rose above 20 million barrels a day in November for the first time since 2008, according to preliminary data. While the agency boosted its forecast for the crude volume OPEC will need to supply, “making room” for the potential return of Iranian exports “could be a challenge for other producers” in the group, it said.

Natural gas (NYMEX:NGF14) continues to rock. Winter storms could portend a 88 bcf drawdown this week and perhaps three times that the week after. If it stays cold, gas will stay hot!

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.


Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.

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