Even the IEA thinks demand will remain robust for decades: File Image/PixaBay
Signs on multiple fronts that the economy will continue to expand rather than contract won over jittery crude traders on Wednesday, and as a result Brent rose 31 cents to settle at $62.37 per barrel, while West Texas Intermediate gained 32 cents to settle at $57.12.
Although arguments have persisted in the past few weeks that concerns of a global slowdown and corresponding drop in crude demand are overblown, the accumulation of hopeful news on Wednesday was almost impossible to ignore and was spearheaded by Jerome Powell, chair of the U.S. Federal Reserve, stating that his country's economy would see a "sustained expansion" with the full impact of recent interest rate cuts still to be felt.
He added that "The baseline outlook remains favourable."
Jerome Powell, chair, U.S. Federal Reserve
The baseline outlook remains favourable
This was followed by the Organization of the Petroleum Exporting Countries (OPEC) claiming that it saw no signs of global recession; Mohammad Barkindo, secretary general for the cartel, insisted that global economic fundamentals remained strong and he remained confident that the U.S. and China would reach a trade deal: "It will almost remove that dark cloud that had engulfed the global economy."
Capping off the positive sentiments on Wednesday was the disclosure from the American Petroleum Institute that U.S. crude inventories fell by 541,000 barrels in the week to November 8 to 440 million, compared with analysts' expectations for a 1.6 million barrel increase.
While the bulk of these outlooks focused on the near term, there are signs of long-term demand for crude too: in its new World Energy Outlook 2019 Report, the International Energy Agency noted that while the importance of transitioning to a carbon-neutral world is recognized, oil output will keep rising over the next decade with 85 percent of the increase in production coming from the U.S. - in order to meet a growing global economy and increasing populations.
The IEA went on to predict that China will overtake the European Union to become the largest net importer of crude, and as India's economy expands it will import about 90 percent of its oil, which will become a "major factor in global trade and energy security."
Some even went so far as to call the IEA forecast's of oil demand peaking by 2030 too conservative: Scott Sheffield, chief executive officer at Pioneer Natural Resources, pointed out that many predictions call for demand peaking between 2030 and 2050, and that "I think we'll hit somewhere between that time frame."