Daily Energy Report
Summary Contradiction: Global oil inventories bullish—Oil outlook bearish, LNG asset risk, Saudi oil to Russia, India message to OPEC, Harris fracking comments, China solar bankruptcies, and more.
Chart of the Day: The Decline in Global Commercial Oil Inventories Is Bullish
Summary
Figure (1) shows trends in global commercial oil inventories. They are not only declining. They are below 2023 levels and are approaching the 5-year average. Commercial oil inventories are a proxy for supply and demand and affect oil prices. In general, using total inventories, which includes the SPR, has no relevance to the daily markets.
EOA’s Main Takeaways
Among the flood of bearish news, global commercial crude inventories come as the light at the end of the tunnel. It is important to understand that part of the bearishness, especially in China, is the withdrawal from inventories to feed demand, which in turn reduced oil imports and global oil demand. Countries cannot continue withdrawing from inventories indefinitely. There will be a time when they must rebuild inventories. As you can read below, if China starts building inventories, demand will increase, although consumption may not.
Story of the Day
MSN: Oil Demand Growth Slowest Since Pandemic on China Weakness, IEA Says
Bloomberg: Oil Advances for Second Day as Storm Disrupts US Gulf Production
Business Times: Oil Prices Surge Amid Hurricane Francine's Disruption, But Global Demand Concerns
Summary
Global oil demand grew at its slowest pace since 2020 in the first half of the year, largely due to China’s economic slowdown and its shift to EVs, according to the IEA. The IEA warns of a potential surplus, even with OPEC+ extending supply cuts. Meanwhile, oil prices rose as Hurricane Francine disrupted US crude production in the Gulf of Mexico, temporarily shutting down about 39% of the region’s oil output. Despite the rebound, concerns about weakened demand from China and a potential US slowdown indicate bearishness.