Follow-Up To An Earlier Post On 2018 - 2020 Global Crude Oil Demand -- August 20, 2019

Locator: 10025GLOBALDEMAND.

Bottom line: global demand for crude oil was revised upward for 2018, and global demand will continue to increase through 2020, according to latest reports from OPEC.

See this note for background.

Pay particular attention to this:

• OPEC reports July's oil output was two (2) million bopd short of global demand;

The reader who noted that, also noted this:

It should be noted, that to the best of the writer's knowledge, no one is reporting that OPEC supply in July, 2019, was two (2) million bopd less than global demand.

That was a couple of days ago.

Today, the reader provided an update and a likely explanation for the "2 million bopd" figure. From the reader today:

I now understand why no one had that 2 million barrel shortfall that the OPEC report revealed. Whoever wrote the demand summary for OPEC started with a big misdirect that was picked up by the media, who have press deadlines to meet & who thus don't have the time to dig through a hundred pages of tables ... below is the note Reuters picked up that OPEC demand intro and came up with a headline that read:

OPEC sees bearish oil outlook for rest of 2019, points to 2020 surplus despite an upward revision to demand. Nick Cunningham at Oilprice did the same thing, called the OPEC report bearish. 

The key thing to look at is the revision line on the demand table: https://rjsigmund.files.wordpress.com/2019/08/july2019opecreportglobaloildemand.jpg.

This is the explanation in greater detail:

What happened here is that whoever wrote the OPEC summary misstated what the data showed.

The Reuters article reads "the Organization of the Petroleum Exporting Countries cut its forecast for global oil demand growth in 2019 by 40,000 barrels per day (bpd) to 1.10 million bpd and indicated the market will be in slight surplus in 2020."

Since that didn't fit anything I saw when reading the report, I went back and found the summary that Reuters referred to.

On page 43 of the OPEC report, the first line of their demand summary says

"World oil demand is projected to rise by 1.10 mb/d in 2019, showing a downward revision of 0.04 mb/d from the previous month’s projection. "

The table on the same page shows the data, which I've already written about (see link to the table above);

You'll see that demand for 2019 was revised 0.05 mb/d HIGHER...but because demand for 2018 was concurrently revised 0.08 mb/d higher, the GROWTH of demand from 2018 to 2019 was revised down a rounded 0.04 mb/d.

Everyone who is writing about the OPEC report is taking that downward revision of growth to mean reduced demand, which is not the case. In fact, third quarter demand was revised 0.08 mb/d higher and came in 1.98 mb/d greater than July's global output.

Comment: I see this often: folks confusing "growth" with "demand" when looking at these reports. 

This gets deep into the weeds but it's important enough on many levels to deserve a post of its own.

Bottom line:

Demand growth was adjusted lower, not that demand was adjusted lower.

In fact, 2019 demand was adjusted higher, but 2018's demand was revised even higher, and hence the difference between 2018 and 2019, ie "growth", was less.

I get it. I wouldn't have figured it out on my own, but I get it. Because I've made that same mistake.

By the way, on another note, I pretty much ignore prognostications regarding crude oil demand put out by OPEC.