Global Oil Demand Update -- OMG -- Oil Demand Forecast To Drop the Equivalent of Two Months Bakken Well Production

Link here.

A fair number of talking heads said oil dropped from $100 to $80 this past week or so due to downgrade of US credit rating (AAA to AA+), economic signs pointing to a global slowdown, and risk of a double dip recession in the US.

With that, the US Energy Information Agency forecast a drop in growth -- at least that was the headline.

So, let's look at the very short history of that headline.

• "Last month" the EIA forecast growth of 1.65% in oil demand for next year. WTI about $100.
• "Now," the EIA has moved that forecast to 1.6% growth in oil demand for next year. WTI plunges to $80.
• Global oil demand will grow 1.6% to 88.19 million barrels a day this year, down slightly from a rise of 1.65% projected last month, the U.S. Energy Information Administration said Tuesday. 
• The EIA projected the world real gross domestic product growth will grow by 3.4%, a modest uptick from the July growth forecast of 3.3%
• China, the world's second-biggest oil consumer after the US will post 9.1% demand growth to 10 million barrels a day. That will account for more than 60% of global growth of 1.37 million barrels this year and half of the growth in the developing nations.

Does anyone really believe those numbers (1.65 vs 1.60 and 3.3 vs 3.4) are reproducible and//or statistically significant?

Having said that, was anyone even aware that the EIA actually raised the global growth forecast for next year?

The difference between 1.65% and 1.60% is 0.05%. Multiplying 86.80 million bbls/day by 0.0005 --> 45,000 bbls. An average Bakken well will produce 45,000 bbls in the first six months of production; some Bakken wells produce that much in the first two months. 

I can't say that $100/bbl is the right price for WTI oil, but a swing from $100 to $80 based on the output of a Bakken well for two months seems a bit overdone. Even in a global downturn, there is still an increasing demand for oil. (Have folks forgotten about the nuclear moratorium in Japan and Germany? Yes, I know oil won't replace nukes, but fossil fuels will.)

My math is often weak, and I will gladly correct these figures if I made a mistake. If I made a mistake, it's with the placement of the decimal.

If I didn't know better, I would suggest that DA, at the request of BO, phoned the EIA and told them to put out a press release telling them that the increase in global oil demand would drop from the previous forecast, never mind that the drop was not significant, not reproducible, not verifiable, and not statistically significant.

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Even OPEC, who says the demand forecast will drop next year, says demand will actually rise 1. 2 million bbls/day next year over this year.

Global oil demand will still rise by 1.2 million barrels a day, and the downgrade represents only a fraction of the 88.14 million barrels a day OPEC expects to be consumed this year worldwide.

There is so much confusion in the numbers; here's another data point:

The group's data also still points to a supply gap of 811,000 barrels a day in the second half of this year, according to a Dow Jones calculation of the difference between current oil output and OPEC's demand forecast for the coming period.