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Page added on May 18, 2018
IEA Cuts Oil Demand Forecasts As Markets Evolve
The IEA has cut oil demand forecasts as the recent growth in oil prices continues. The agency expects demand to fall in response to high prices, but there are a growing number of analysts who believe that the fundamental drivers of oil demand are undergoing a massive shift.
The IEA’s forecast sees a drop in 2018 global oil demand growth to 1.4 mb/d, as the oil price hits a high not seen since 2014. A key concern is international geopolitics, as for example when Total announced it is withdrawing from its Iranian projects, following US withdrawal from the Iranian nuclear deal. Another issue is that many importers of oil are cutting end-user fuel subsidies. It’s not as simple as high prices curbing demand however. The oil majors seem to be undergoing a reassessment of exactly what the future holds, and how far oil extraction and exploitation will continue to be the dominant paradigm. What’s driving this is changing investor perception of the future.
Mark Fulton, Senior Fellow at Ceres, Founding Partner at Energy Transition Advisors and co-author of the recent released Clean Trillion report said, ‘Oil demand is likely to peak in the next few years, well ahead of many companies’ expectations.’ According to CERES, investors are increasingly seeking to mitigate their exposure to investments with high physical and environmental risks, such as water scarcity, emissions, other pollution or other costs related to climate change. This, in turn, favours clean energy, which tends to be far less vulnerable to climate impacts than conventional baseload power generation and associated infrastructure.
As UAE Minister of Energy Shual Al Mazroui said in January 2018, ‘We are trying to move subsidies from oil and gas to new forms of energy. There’s enough energy potential in our region to export to Europe and Africa too’. It may be that that shift is due to the export potential for oil and the falling price of renewables, but it is indicative of a major shift in global thinking.
Even Patrick Pouyanné, Chief Executive of Total, said earlier this year that the oil industry has been forced into a period of refocus, identifying where the company was most likely to find growth and efficiencies. Today around 5% of Total’s portfolio is in renewables, a capital investment of $5-6 billion, and in 20 years Pouyanné said he expects Total’s portfolio to be 20% renewable. The company plans to invest $1 billion per year in new technology and as Pouyanné said, ‘It’s a question of the company evolving its strategy.’
The latest oil company understood to be limiting its output is Spain’s Repsol, as a Bloomberg report suggests that it’s no longer intending to seek growth in the oil sector. It says that the company is expected to release a new business plan that limits oil and gas output to current levels and keeps no more than eight years of reserves in stock. Recently Statoil changed its name to Equinor, to reflect its evolution into a broader energy business. According to the chair of its board Jon Erik Reinhardsen, the name change is also a reflection of the importance of the energy transition.
The big issue remaining about the future of the energy mix is what the market’s response will be. In 2016 there was roughly $300 billion invested in renewables and $300 billion invested in fossil fuels, causing some to question whether or not the markets have already reached a tipping point. In 2017, according to CERES, this had shifted to where clean energy investment was more than US$ 333 billion, compared to only US$ 144 billion invested in conventional fossil fuels and nuclear.
There has also been a significant shift in available mechanisms for investors to get involved in alternatives to fossil fuels. CERES expects that Investors are most likely to become involved in primary market clean energy investment in the following ways:
- Investing in infrastructure or private equity funds;
- Direct project-level investment — e.g., infrastructure equity, project loans, bonds — principally by large investors;
- Buying securitized bonds or equity;
- Investing in green buildings — e.g., energy efficiency bonds;
- Funding the balance sheets of corporate developers —debt and equity.
- Institutional investors’ fiduciary obligations demand consideration of climate-related risks and climate solution opportunities across investment portfolios.
Fulton says, ‘Clean energy technologies such as wind and solar have de-risked and become a central competitive threat to fossil fuels and nuclear power, even as incentives decline.’ And that means that minor shifts in production and delivery capacity might be the least of the oil industry’s concerns.
29 Comments on "IEA Cuts Oil Demand Forecasts As Markets Evolve"
Anonymous on Fri, 18th May 2018 7:43 am
US oil just hit record exports of 2.5 million bpd of crude and condensate.
https://twitter.com/NicoLongShort/status/996760327479070720
P.s. Of course, this is not a net number. But it does show growing transfer of our light sweet, which is highly desirable on world markets.
baha on Fri, 18th May 2018 8:14 am
+1
Antius on Fri, 18th May 2018 8:34 am
Here is a link to UK grid watch, which tracks UK electricity generation.
http://gridwatch.co.uk/
At the time of writing, demand is 35.7GW. Some 7.39GW (20.7%) is solar; some 0.538 GW (1.5%) is wind and some 1.9GW (5.3%)is biomass. That is about 28% renewable, with the balance being natural gas and nuclear.
Dredd on Fri, 18th May 2018 11:48 am
“Markets Evolve”
Yep … from bastids to bastids-on-steriods (New White Trash: Doublewide Doublespeak).
twocats on Fri, 18th May 2018 7:02 pm
This article is very full of the cray-cray.
to say that a .1 mbpd decrease in a demand estimate is caused by OIL COMPANIES CHANGING THEIR THINKING?!?!?! WHAT?!?!?!? This is jumping the megaladon mixed with triple reverse psychology and a sprinkling of the classic – “Yeah, well, I meant for that happen.”
energy investor on Fri, 18th May 2018 7:03 pm
Antius,
I looked at these graphs in your link at 11.45am NZ time and that showed almost no wind or solar contribution at all, as it is obviously a calm night in Britain.
To suggest that any power grid can rely on such intermittent supplies from renewables is simply delusional….unless you actually advocate more use of hugely intermittent sources…in which case it is just some sort of doctrinaire PC propaganda.
Without cost-effective grid storage, increasing the proportion of renewables is simply not going to work for the UK grid.
For NZ where 80% of our electricity comes from hydro and geothermal sources, there is considerable merit in ramping up renewables. The addition of solar panels and wind generators on homes and farms also makes sense, as does roof-top solar water heating in some regions. But we are, with Norway, in a minority of countries where our power grids have such luxury.
There is no need for people to overstate the case for wind and solar energy. It is logical in some places. But installing solar in some places faces the prospect of it being uneconomic due to weather, or inapplicable if done on grid scale.
Horses for courses. Gretchen Bakke’s fine book, “The Grid” spells out the issues.
Boat on Fri, 18th May 2018 7:07 pm
amoose
Net is down of course.
https://www.eia.gov/dnav/pet/PET_MOVE_WKLY_A_EP00_IMN_MBBLPD_W.htm
At this growth rate of production the US could be net free of imports by the end of 2019.
Boat on Fri, 18th May 2018 7:17 pm
Energy investor
California has enough solar to create the duck shape consumption figure. This is great. They solved daily peak demand. 4-6 hrs worth of battery storage will be the next jump in renewable saturation. Batteries will cover presolar hrs and post solar hrs.
For areas like Texas solar and wind work together better and should require less battery. Be patient, these advancements take time. But already cheaper than coal….it will happen.
MASTERMIND on Fri, 18th May 2018 7:24 pm
Boat
You are putting the cart in front of the horse..Its not likely ever going to happen.The reason you are arguing in absolute terms “it will happen”..Is because you need to convince yourself.
dave thompson on Sat, 19th May 2018 3:43 am
Boat the idea that battery back up at grid scale is feasible, affordable and in our collective near term future is delusional. I was just pricing battery back up with a friend building an off grid summer home and we found it cheaper to have the power lines extended to the place. Now mind you it was a short run but the battery backup would have cost over $15,000.00.
Davy on Sat, 19th May 2018 11:16 am
“Why The Soaring Dollar Will Lead To An “Explosive” Market Repricing: A Flow Chart”
https://tinyurl.com/yb4rrmjl
“Something curious took place one month ago when the PBOC announced on April 17 that it would cut the reserve requirement ratio (RRR) by 1% to ease financial conditions: it broke what until then had been a rangebound market for both the US Dollar and the US 10Y Treasury, sending both the dollar index and 10Y yields soaring…… which led to an immediate tightening in financial conditions both domestically and around the globe, and which has – at least initially – manifested itself in a sharp repricing of emerging market risk, resulting in a plunge EM currencies, bonds and stocks. Adding to the market response, this violent move took place at the same time as geopolitical fears about Iran oil exports amid concerns about a new war in the middle east and Trump’s nuclear deal pullout, sent oil soaring – with Brent rising above $80 this week for the first time since 2014 – a move which is counterintuitive in the context of the sharply stronger dollar, and which has resulted in even tighter financial conditions across the globe, but especially for emerging market importers of oil. Meanwhile, all this is playing out in the context of a world where the Fed continues to shrink its balance sheet – a public sector “public Quantitative Tightening (QT)” – further tightening monetary conditions (i.e., shrinking the global dollar supply amid growing demand), even as high grade US corporate bond issuance has dropped off a cliff for cash-rich companies which now opt to repatriate cash instead of issuing domestic bonds, with the resulting private sector deleveraging, or “private sector QT”, further exacerbating tighter monetary conditions and the growing dollar shortage (resulting in an even higher dollar).”
“And while the latest incarnation of the dollar’s “impossible trilemma” – rising dollar, rising oil, rising yields (not to be confused with its more conventional Chinese variant) makes a short, if perplexing appearance, ultimately it’s all about the value of the dollar, and its impact on downstream assets and volatility.”
Davy on Sat, 19th May 2018 11:25 am
“Globe Just Experienced its Third Hottest April on Record”
https://tinyurl.com/ybs6bl2k
“According to reports from NASA GISS, the world just experienced its third hottest April on record. Topping out at 0.86 degrees Celsius above NASA’s 20th Century baseline, April of 2018 edged out 2010 as third in the record books despite the ongoing natural variability based cooling influence of La Nina. (Analysis of present global temperature anomalies with information provided by NASA, NOAA and Earth Nullschool.) The warmest regions of the world included large sections of the lower Arctic — encompassing Eastern Siberia, the East Siberian Sea, and the Chukchi Sea. In addition, Central Europe experienced much warmer than normal conditions. Notable cool pools included North-Central North America, the High Arctic, and the Weddell Sea region of Antarctica. A seasonal reinforcement of the Jet Stream helped to keep cold air sequestered in the High Arctic during April. However, this sequestration appears to be weaker compared to recent April-through-June periods as record warm spikes returned to the High Arctic during early May. The result of strong south-to-north heat transfer through various ridge zones in the Jet Stream.”
“La Nina remained the prominent natural variability related feature during April. And the cooling influence of La Nina has tamped global temperatures down a bit following the recent record hot year of 2016. Overall, it appears that global temperatures are on track to average between 1.04 C and 1.08 C above 1880s averages during 2018. These rather high excessions are, of course, caused by atmospheric greenhouse gasses peaking in the range of 410 ppm CO2 (around 491 ppm CO2e) during April, May and June. Representing the greatest concentration of heat trapping gasses on Earth in about 15 million years.”
jawagord on Sat, 19th May 2018 11:41 am
NASA-GISS calls it:
“…..the cooling influence of La Nina has tamped global temperatures down a bit following the recent record hot year of 2016.”
Others call it the:
“Would it surprise you to learn the greatest global two-year cooling event of the last century just occurred? From February 2016 to February 2018 (the latest month available) global average temperatures dropped 0.56°C. You have to go back to 1982-84 for the next biggest two-year drop, 0.47°C—also during the global warming era. All the data in this essay come from GISTEMP Team, 2018: GISS Surface Temperature Analysis (GISTEMP).”
https://www.realclearmarkets.com/articles/2018/04/24/did_you_know_the_greatest_two-year_global_cooling_event_just_took_place_103243.html
I call it:
Get on with your life, there is nothing you can do about the weather and climate so adapt!
Davy on Sat, 19th May 2018 2:12 pm
I call it:
When you farm you want to be on top of weather and climate.
Cloggie on Sat, 19th May 2018 4:00 pm
https://cleantechnica.com/2018/05/17/daf-trucks-partners-with-vdl-groep-on-a-fully-electric-class-8-truck/
Not without pride, from my hometown, the fully electric DAF truck. Range 100 km, full charge in 90 minutes.
MASTERMIND on Sat, 19th May 2018 8:18 pm
Clogg
Norwegian Gas Exporter Warns Europe May Be on Verge of Blackouts
https://www.bloomberg.com/news/articles/2018-05-15/norwegian-gas-exporter-warns-europe-may-be-on-verge-of-blackouts
Looks like Clogg might not be on peak oil in the near the near term…Better start shoveling up that coal under the north sea..LOL
Cloggie on Sun, 20th May 2018 3:32 am
More renewable energy good news:
https://deepresource.wordpress.com/2018/05/20/two-blade-wind-turbines-are-back-this-time-offshore/
Why three blades if two blades suffice?!
50% offshore wind cost reduction, already the most competitive electricity source (after hydro-power).
#TooCheapToMeter
Antius on Sun, 20th May 2018 5:59 am
”
https://cleantechnica.com/2018/05/17/daf-trucks-partners-with-vdl-groep-on-a-fully-electric-class-8-truck/
Not without pride, from my hometown, the fully electric DAF truck. Range 100 km, full charge in 90 minutes.”
100km range with 90 minute recharge is piss poor. So basically you drive for one hour on a highway and then pull over for 1 1/2 hours to recharge. Paying the driver the whole time.
If electric vehicles are ever to penetrate the haulage market they need to do better than this.
Cloggie on Sun, 20th May 2018 7:20 am
Any idea how much time it takes to unload a large truck?
Davy on Sun, 20th May 2018 7:54 am
“Any idea how much time it takes to unload a large truck?”
Probably since you have never had any experience with large trucks that would be a tough one for you. I used to have a large truck to haul corn and beans. Basically that is a factor of the product being dealt with. Pretty simple huh?
Cloggie on Sun, 20th May 2018 8:28 am
The point was to counter the argument made by Antius that 90 minute was too long for recharging, where my (admittedly laymen’s) intuition tells me that a large chunk of that 90 minutes will be used anyway to load/unload the “class 8” truck, shown in the link:
https://cleantechnica.com/2018/05/17/daf-trucks-partners-with-vdl-groep-on-a-fully-electric-class-8-truck/
But since Holland is a transport nation pur sang (because of the presence of the Rotterdam harbor), these kind a figures are just a few keystrokes away:
http://www.hoekstrasneek.nl/detail/hoe-lang-duurt-laden-en-lossen/4
van 8,5 tot 13,60 laadmeter maximaal 60 minuten
Hookay… since the DAF truck is definitely longer than 8.5 meters, “laden en lossen” will take up to an hour, so it looks like the driver has indeed some time lift for a cup of coffee or a smokey. Or more likely some time left to stare at a screen.
Fortunately we have the Swedish solution around the corner in the longer term, when nobody needs to worry about recharging or batteries:
https://deepresource.wordpress.com/2018/05/08/e-road-e-vehicles-breakthrough-in-sweden/
In fact, self-driving e-trucks can use the road at night and lower congestion during the day, when for instance trucks are forbidden to use the roads between 7:00-9:30 and 16:00-19:00.
MASTERMIND on Sun, 20th May 2018 8:43 am
IEA’s Birol says oil supply a concern as demand growing while output falls
https://uk.reuters.com/article/india-ief-iea/update-1-ieas-birol-says-oil-supply-a-concern-as-demand-growing-while-output-falls-idUKL3N1RO3LL
Antius on Sun, 20th May 2018 9:35 am
“Any idea how much time it takes to unload a large truck?”
Well there is that to consider. But the truck is effectively useless for distances >100km.
Why not fit it with swappable batteries?
MASTERMIND on Sun, 20th May 2018 10:51 am
Peak oil never disappeared, and it will strike, full force, sooner rather than later.
Cloggie on Sun, 20th May 2018 11:27 am
“Why not fit it with swappable batteries?”
Perhaps because they weigh 5 ton?
I’ll opt for the Swedish solution: recharging while driving via a rail in the road. If they could build a national fine-mazed rail-network in the 19th century, they certainly can equip all major roads today with a stupid rail, leaving the last 30 km for the onboard batteries.
Cloggie on Sun, 20th May 2018 11:33 am
“Peak oil never disappeared, and it will strike, full force, sooner rather than later.”
You do realize that after peakoil there will be a gradual down hill movement that will take decades:
https://goo.gl/images/mwuLro
Peakoil does NOT mean falling off an energy cliff. Sorry to have to sabotage your anarchist wet dreams.
Peak oil at worst means a rapid increase of the oil price, which stabilizes/decreases demand. Think $150 like in 2008.
MASTERMIND on Sun, 20th May 2018 12:29 pm
Clogg
Without increasing oil production you can’t increase global GDP..And without growth the systems goes into a permanent recession and deflationary death spiral.And 150 oil doesn’t destroy demand because you need oil for everything. it destroys the world economy. .And the collapse will be rapid..think world trade centers..
MASTERMIND on Sun, 20th May 2018 12:31 pm
Clogg
Peak oil doesn’t mean falling off a cliff..Tell that to the Soviet Union who peaked and then collapsed in two years. And their oil production dropped by 25%..
This world will burn!
Antius on Sun, 20th May 2018 2:38 pm
Peak global liquids energy production will simply be a date in the calendar. On a net energy basis, it may very well have been and gone. The global economy has been creaking under the strain of increasing energy costs since 1973. Various adaptations and compromises have been made – globalization being one of them.
We have been living with ‘peak oil’ for as long as most people here have been alive. Yet it is hard to escape the impression that we are approaching some kind of tipping point.