BOE Report: Oil heads for weekly loss as Chinese demand continues to underperform
Global oil market faces a million-barrel glut next year, says IEA, Supply from the U.S., Brazil, Canada and Guyana is set to grow by Grant Smith and Alex Longley, Bloomberg News, Nov 14, 2024, Financial Post
Global oil markets face a surplus of more than one million barrels a day next year as Chinese demand continues to falter, cushioning prices against turmoil in the Middle East and beyond, the International Energy Agency (IEA) said.
Oil consumption in China — the powerhouse of world markets for the past two decades — has contracted for six straight months through September and will grow this year at just 10 per cent of the rate seen in 2023, the IEA said in a monthly report on Thursday. The global glut would be even bigger if OPEC+ decides to press on with plans to revive halted production when it gathers next month, according to the agency.
It’s possible that China’s oil demand has peaked, IEA head of oil Industry and markets Toril Bosoni said in an interview with Bloomberg TV on Thursday.
“It’s not just the economy and the shift, the slowdown in the construction sector,” Bosoni said. “It’s the transition to electric vehicles, high speed rail and gas in trucking that is undermining Chinese oil demand growth.”
Amid this extended weakness in Chinese demand, crude prices have retreated 11 per cent since early October despite ongoing hostilities between Israel and Iran, as traders focus growing output in the Americas, the Paris-based IEA said. The decline foreshadows a “well-supplied market in 2025,” it added. Brent futures traded near US$72 a barrel on Thursday.
Global oil consumption will increase by 920,000 barrels a day this year — less than half the rate seen in 2023 — to average 102.8 million per day, it said. Next year, demand will grow by 990,000 barrels a day.
“The sub-one million barrel-a-day growth pace for both years reflects below-par global economic conditions with the post-pandemic release of pent-up demand now complete,” according to the report. “Rapid deployment of clean energy technologies is also increasingly displacing oil in transport and power generation.”
The agency, which advises major economies, predicted earlier this year that world demand will stop growing this decade amid a shift away from fossil fuels toward electric vehicles and renewable energy.
While demand growth cools, supplies from producers such as the United States, Brazil, Canada and Guyana are set to grow this year and next by 1.5 million barrels a day, the agency predicts. As a result, world supplies will exceed demand next year by more than one million barrels a day, even if the 23-nation OPEC+ cartel abandons plans to restore output.
The Organization of the Petroleum Exporting Countries and its allies have been seeking to restart production halted since 2022, but has been forced to delay the move twice because the market remains so fragile. It currently plans to begin a series of modest monthly increases with a hike of 180,000 barrels a day in January, and will gather on Dec. 1 to review the decision.
OPEC’s secretariat has belatedly recognized the demand slowdown, cutting its forecasts for this year by 18 per cent during four consecutive monthly downgrades. Nonetheless, its projection of 1.8 million barrels a day of growth remains roughly double the rate seen by the IEA, and higher than most other market observers.
Ovintiv is buying Montney shale assets in Canada for $3.3 billion, The deal will add about 70,000 barrels of oil per day by The Canadian Press, Nov 14, 2024, Financial Post
CALGARY — Ovintiv Inc. says it has signed a deal to buy a group of assets in the Montney region from Paramount Resources Ltd. in an all-cash deal valued at about US$2.38 billion ($3.3 billion).
The deal will add about 70,000 barrels of oil equivalent per day of production.
Ovintiv says the assets are strategically located near its current operations and have access to midstream infrastructure with available capacity.
Ovintiv chief executive Brendan McCracken says the acquisition is the result of an in-depth technical and commercial analysis of the basin to identify the highest value undeveloped oil resource.
The company also announced it has signed a deal to sell substantially all of its Uinta Basin assets in Utah, to FourPoint Resources, LLC, for total cash proceeds of about US$2.0 billion.
Cash from the Uinta deal is expected to be used to help fund the Montney acquisition.