Changing of the Guard
- Internal sources suggest Chinese peak oil demand
- EV and hybrid sales surging in China
- Indian demographics herald a shift
- Natural gas futures prices following seasonal pattern
Sincerely,
David Thompson, CMT
Executive Vice President
Powerhouse
(202) 333-5380
The Matrix
Analysis from the research arm of China’s largest oil producer (CNPC) posits that China’s refined oil consumption likely peaked in 2023 at just under 8 million barrels per day. CNPC forecasts that by 2035, both Chinese gasoline and diesel demand will be down by 35-50%. Demand for transportation fuels has started to decline this year following a few years of stagnation. Chinese EV and hybrid sales surpassed internal combustion engine vehicle sales for the first time in July.
It is important to note that this bearish analysis is coming from arguably one of the most important Chinese industry sources as opposed to a Western think tank with less access to information. This stall in demand arrived a few years earlier than forecast by the International Energy Agency just a few months ago.
As China’s decades-long run of being the most important component of global oil demand growth appears to be reaching an end, the geopolitical focus shifts to India.
Last week a blockbuster supply deal was announced. Indian refiner Reliance agreed to buy 500,000 barrels per day of Russian crude oil for the next ten years. This deal amounts to roughly 0.5% of global supply. This oil will go to the world’s largest refining complex located at Jamnagar.
This headline-grabbing deal shines a spotlight on India’s ascension to nearly co-equal prominence with China in terms of influence on global oil demand. While China currently imports and consumes more oil, India is forecast to edge out China as the largest source of global oil demand growth from 2023 to 2030.
Source: IEA
The IEA and The World Bank assess that India’s oil consumption will increase at a faster pace than other countries because of its stage of economic development. World Bank research puts Indian per capita GDP at $2,400 in 2022, well behind China’s $12,700. A unique aspect of the interplay between economic development and energy consumption is that as countries per capita GDP grows between $2,000 – $10,000, growth in energy use is at its highest.
POWERHOUSE continues to seek out energy news relating India and we encourage readers of The Weekly Energy Market Situation to do the same. Change remains the eternal constant in energy markets at the transition from China to India will be a fascinating one.
Supply/Demand Balances
Supply/demand data in the United States for the week ending December 6, 2024 were released by the Energy Information Administration.
Total commercial stocks of petroleum decreased (⬇) 0.9 million barrels to 1.2364 billion barrels during the week ending December 6th, 2024.
Commercial crude oil supplies in the United States were lower (⬇) by 1.4 million barrels from the previous report week to 422.0 million barrels.
Crude oil inventory changes by PAD District:
PADD 1: Down (⬇) 0.6 million barrels to 8.0 million barrels
PADD 2: Down (⬇) 2.7 million barrels to 105.0 million barrels
PADD 3: Down (⬇) 0.5 million barrels to 235.1 million barrels
PADD 4: Up (⬆) 0.5 million barrels to 24.3 million barrels
PADD 5: Up (⬆) 1.9 million barrels to 49.6 million barrels
Cushing, Oklahoma, inventories were down (⬇) 1.3 million barrels to 22.9 million barrels.
Domestic crude oil production increased (⬆) 118,000 barrels per day from the previous report at 13.631 million barrels per day.
Crude oil imports averaged 5.984 million barrels per day, a daily decrease (⬇) of 1,306,000 barrels. Exports decreased (⬇) 1,136,000 barrels daily to 3.099 million barrels per day.
Refineries used 92.4 percent of capacity; a decrease (⬇) of 0.9 percent from the previous report week.
Crude oil inputs to refineries decreased (⬇) 251,000 barrels daily; there were 16.659 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, decreased (⬇) 161,000 barrels daily to 16.933 million barrels daily.
Total petroleum product inventories increased (⬆) by 0.5 million barrels from the previous report week, up to 814.4 million barrels.
Total product demand increased (⬆) 189,000 barrels daily to 20.158 million barrels per day.
Gasoline stocks increased (⬆) 5.1 million barrels from the previous report week; total stocks are 219.7 million barrels.
Demand for gasoline increased (⬆) 73,000 barrels per day to 8.810 million barrels per day.
Distillate fuel oil stocks increased (⬆) 3.2 million barrels from the previous report week; distillate stocks are at 121.3 million barrels. EIA reported national distillate demand at 3.450 million barrels per day during the report week, an increase (⬆) of 53,000 barrels daily.
Propane stocks fell (⬇) 3.0 million barrels from the previous report to 93.1 million barrels. The report estimated current demand at 1,683,000 barrels per day, an increase (⬆) of 858,000 barrels daily from the previous report week.
Natural Gas
As 2024 comes to a close, we see NYMEX natural gas futures completing a very stereotypical year in terms of the pattern of price throughout the year. Chart 1 shows an index of natural gas futures prices over the last ten years. The Index shows the percentage variation from the average yearly price, on a weekly basis. This gives a picture of the average path of prices over the course of the year.
Chart 2 shows the continuous, weekly natural gas futures price chart for 2024. Even a cursory glance highlights a high degree of similarity, aside from relatively higher highs in January and June of this year. Traders should take note of the historical tendency for a double top in price in November and December followed by a significant sell-off. Of course, past behavior is not a guarantee of future performance.
Chart 1
Chart 2
Source: LSEG
According to the EIA:
- Net withdrawals from storage totaled 190 Bcf for the week ending December 6, compared with the five-year (2019–2023) average net withdrawals of 71 Bcf and last year’s net withdrawals of 72 Bcf during the same week. Working natural gas stocks totaled 3,747 Bcf, which is 165 Bcf (5%) more than the five-year average and 67 Bcf (2%) more than last year at this time.
- According to The Desk survey of natural gas analysts, estimates of the weekly net change to working natural gas stocks ranged from net withdrawals of 144 Bcf to 212 Bcf, with a median estimate of 175 Bcf.
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