Demand Coming Back. The Energy Report 12/02/2024

Oil is getting a boost on improving demand reports from China and India offsetting concerns about the OPEC Plus meeting delay. OPEC Plus delayed their meeting because of some conflicts with some members but that raised concerns that the extension of the production cut may not be a done deal after all. OPEC paths ceded some market share and there were a lot of producers who wanted to start opening the spigot to take advantage of their investments in oil and gas. Again, if the early demand numbers coming out of Asia are of any consequence, we may need some extra oil this winter after all.

Energy World reported that India’s fuel consumption witnessed a robust uptick in November 2024, with petrol. John Kemp reported that, “CHINA’s manufacturers have reported a steady improvement in business activity since the end of the summer. The official purchasing managers index rose to 50.3 (49th percentile for all months since 2011) in November up from 50.1 (37th percentile) in October and a recent low of 49.1 (6th percentile) in August. The index has increased for three months in a row and has been above the 50-point threshold, notionally dividing expanding activity from a contraction for two consecutive months.

That should show an improvement for China’s oil demand.

Geopolitical risk is still high as the Israeli cease fire in Lebanon broke down and Syria is not fighting off a coup. Syrian rebels are looking to take out Syrian dictator Bashar al-Assad and now control of most of Aleppo. Iran has sent troops to try to stop the coup.

NPR reports that the group behind these dramatic developments, Hayat Tahrir al-Sham (HTS), has held a consequential but checkered role in the country’s long-running civil war. With its roots in the early days of Syria’s 2011 uprising, the Organization for the Liberation of Greater Syria swept down this week from its strongholds in the northwest countryside to take control of a vast swath of a country that had long been under the grip of Syrian President Bashar al-Assad’s forces.

Now that oil has gotten through the Thanksgiving Day holiday, we can now focus more on supply and demand. This week we should see drawdowns in inventories across the board and cold weather could keep the market well supported.

Natural gas prices here in the United States are pulling down because of weather forecasts. It suggests that this recent cold blast will come to an end and we might actually flip to warmer than normal temperatures. Then later in the month at the same time though Europe is still in a situation where the temperatures are cold and that is raising concerns and that their energy infrastructure might not hold up if they get a long, cold, hard winter.

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