Near Term v. Long Term, Asia v. The West
Minneapolis, MN | March 20, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC
Three Things
In line with consensus, the Energy Information Administration (“EIA”) sees the market tightly balanced for 2023, with inventory building. Wood Mackenzie points out the long-term risk of tighter markets, despite modest demand growth over the next ten years.
Forecasters reiterate dependence on China for 2023 demand growth and India to a lesser extent.
Airline traffic reflects the East/West divide and Asia’s potential for demand recovery.
Crude Oil
The EIA released its January Short Term Energy Outlook (“STEO”) last week, and in it, they updated their forecast liquids consumption to 100.9mm bpd for this year. Like most, their forecast largely depends on recovering Chinese demand, supported by an upwardly revised global economic forecast. They peg Chinese demand growth at 700 kbd. According to the EIA, with 200kbd of growth expected out of India, these two countries account for ~70% of global liquids demand growth, as demand out of the Organization for Economic Cooperation and Development (“OECD”) is forecast to be flat. It’s increasingly hard to reconcile expectations for flat to falling demand in the OECD and rapidly recovering, or growing demand in Asia if analysts believe OECD demand growth is constrained by economic growth. It seems that weak economics in importing countries lead to weak economics in the countries dependent on that demand. Nevertheless, this appears to be the position among many analysts, resulting in production growth to outpace demand for 2023 in their forecasts. In the January STEO, it translates into consistent inventory builds throughout 2023. As a result, they see global liquids production reaching 101.6mm bpd in 2023 and flat to that number in 2024, which means the market is in deficit next year, again.
*This summary is based off March 13, 2023
A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!
Meet the Author!
Email: Sinos@bluelacyllc.com
Phone: +1-832-413-3124
Website: www.bluelacyllc.com
Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.
He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.
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