COM - Global Oil Market: We Are Potentially Weeks Away From Moment Of Truth
2024-05-22 23:24:55 ET
Summary
- OPEC on the one hand and EIA & IEA on the other have diverging views on global oil demand, each side allowing bias to dictate, rather than facts.
- The implications of the EIA and IEA forecasts turning out to be correct include a greater chance for interest rate cuts in the near-future, while oil prices will be stagnant.
- If the OPEC demand forecast turns out to be closer to reality, we will likely see a significant, sustained oil price rally, starting as early as the third quarter.
- An oil price rally will most likely prevent interest rate cuts, leading to a stock market selloff, which is a potential buying opportunity. Higher oil prices will push oil producer stocks higher, which opens a window for taking profits.
Investment thesis
Some years ago, a divergence occurred between OPEC on one hand and the EIA & IEA concerning their longer-term outlook on global oil ( CL1:COM ) demand. The IEA embraced the peak oil demand theory, and now its short-term energy outlook follows its overall thesis. The EIA seems to second their view. For this year and next, both are forecasting global oil demand growth that is almost half as robust compared with OPEC's demand forecast. OPEC's position on this issue is that demand growth remains robust and that an overly dovish position on future oil demand growth can exacerbate what could already turn out to be a tight market that may be upon us within weeks. The investment implications of either scenario go far beyond oil sector investments....
Global Oil Market: We Are Potentially Weeks Away From Moment Of Truth