Tuesday, October 23, 2012

Global Oil Demand & Supply

Most of the earnings disappointments so far during the current earnings season are attributable to the weakness in the global economy. I don’t expect it to get weaker over the remainder of the year, and I do expect some improvement next year. I track world oil demand as another useful way to monitor the global economy. Here is what the latest data, compiled by Oil Market Intelligence (OMI), show:
(1) World crude oil usage rose to a record high of 89.5mbd over the 12 months through September. While “Old World” demand remains depressed, “New World” demand rose to a fresh record high. The latter now exceeds the former by 39%; March 2005 was the inflection point where New World began to exceed Old World demand.

(2) The y/y growth rate of world crude oil demand fell to a recent low of 0.3% during March, but has edged up to 0.8% as of September. The growth rate of oil demand among the non-OECD economies has stabilized recently around 2.5%, while the growth rate for the advanced economies of the 34 members of the OECD is up from -1.7% y/y during March to -0.8% during September. That’s mildly encouraging and suggests that the recent weakness in the OECD’s Leading Economic Index may be short-lived.

(3) I previously have noted that data collected by OMI on world oil demand and supply are estimated using different methodologies and aren’t strictly comparable. However, the ratio of the OMI’s demand and supply series (based on the 12-month averages of each) is positively correlated with the yearly percentage change in the price of a barrel of Brent crude oil. The normalized ratio fell to 0.99 in September, the lowest since June 2009. That's bearish for oil prices, suggesting that only fears of a war in the Persian Gulf are propping them up.

Today's Morning Briefing: Muddy Earnings & Crude Oil. (1) Bad, but not so bad. (2) Comps fruit salad. (3) Guidance is downbeat. (4) Adjusting for Debt Valuation Adjustment. (5) Earnings are down with Financials, but flat without them. (6) Another record high for S&P 500 forward earnings. (7) Q4 earnings revised up for Energy and Financials. IT and Materials down. (8) World crude oil demand at record high. (9) Demand/supply ratio still bearish for oil price. (More for subscribers.)

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