By Phil Flynn
January 27, 2017 • Reprints
It may be the year of the Fire Rooster on the Chinese calendar, but for China and the rest of the Asian block, it is going to be the year or decade of crude oil. Oil prices hit a three-week high as the market focused on rising oil demand expectations and dwindling global oil inventories. While U.S. oil demand slipped a bit for seasonal reasons, a report that India’s oil demand will soar gave the bulls some more reasons to be bullish.
As I said before, when it comes to oil demand India is the new China. A report by BP said energy will grow at the fastest rate among all major economies in the world by 2035, per the BP Statistical Review of the World Energy. India will grow by 4.2% per year, faster than all major economies in the world and their consumption growth of fossil fuels would be the largest in the world. India, the BP report said, will overtake China as the largest growth market for energy in volume terms by 2030.
This comes as Chinese oil demand is not slowing. It was reported earlier this month that in December Chinese oil demand hit a record high. China is becoming more dependent on foreign oil as it is now importing 64.5% of its needs. A lot of that oi is coming from North Sea producers that are working hard to fill the void created by falling OPEC oil production.
Bloomberg reported that North Sea oil to China will hit a record 12 million barrels in the month of January. That is incredible as North Sea production is always dicey this time of year and the Buzzard Oil field was shut for a while due to wintery weather. Some oil traders are also saying that President Donald Trump’s rhetoric is bullish when he says things like the U.S. had taken the oil after the Iraq war then we would not have had ISIS and his further comment that maybe we will get second chance.
The so-called flood of oil from Iran may be drying up. Iran was exempt from a quota at the OPEC meeting and is having a hard time selling some of their oil in storage. Remember the tankers that were filled with oil that was supposed to overwhelm the marketplace and flood us with supply? Well that has just not happened. Apparently the demand for that oil is not as strong as some thought as the quality of the oil is not good.
The BP World Energy Report made other interesting observations. In the one case, the world’s economy almost doubles in size over the Outlook period, driven by fast-growing emerging economies, as more than two billion people are lifted from low incomes. This rising prosperity drives an increase in global energy demand, although the extent of this growth is substantially offset by rapid gains in energy efficiency. Energy demand increases by only around 30%, around a third as much as the expected growth in the global economy.
The fuel mix continues to adjust. Although fossil fuels remain the dominant source of energy, renewables, together with nuclear and hydro energy, provide half of the additional energy required out to 2035. Natural gas is expected to grow faster than oil or coal, helped by the rapid growth of liquefied natural gas increasing the accessibility of gas across the globe.
The most likely path sees carbon emissions from energy continuing to increase, indicating the need for further policy action and raising important choices and opportunities for our industry.
About the Author
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.
Read this article in its original format at Futures Magazine
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