Global Oil Demand Could Leave Gaping Hole: Fuel for Thought

S&P Global Platts
Written By: Paul Hickin
S&P Global Platts
Written By: Paul Hickin

Global oil demand growth was a much heralded sidekick to supply cuts that rebalanced the market in record time. Now the Saudi Arabia-Russia pronged pact is considering reversing course on its output cut deal, while demand growth shows little sign of letting up.

That risks leaving a hole in the market that the OPEC alliance will struggle to plug.

Oil bulls listening to Jeff Currie, Goldman Sachs’ head of commodity research, at the S&P Global Platts Crude Oil Summit earlier this month would have been rubbing their hands with glee. He stated he was his most bullish in a decade.

“The underlying demand trend is what is dominant here, not the OPEC production cuts. That is secondary,” Currie said.

OPEC and 10 other countries embarked on a plan to remove 1.8 million b/d in late 2016 to wipe out a more than 300 million barrel stock overhang. And that mission has been accomplished well ahead of the deal’s expiry at the end of year, thanks to over-compliance to the cut quotas and a healthy appetite for crude.

It’s an appetite that has been called into question at higher prices. But a look at the forecasts from major institutions such as the IEA, IMF and S&P Global Platts Analytics shows that the consensus is that demand is set to remain robust.

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