Morning Market Brief: August 15, 2023

Record-breaking global oil consumption?

The world’s appetite for oil has reached a historical peak, unveiling intriguing dynamics in the global energy landscape. The International Energy Agency’s (IEA) latest report sheds light on the supply-demand scenario that challenges some prevailing assumptions. ?

• Pandemic predictions upended. At the height of the pandemic, when work-from-home trends were in full swing and oil demand at lows, some forecasts called for lower global oil consumption over the long term.
• However, latest IEA report points to record consumption. In June, the world consumed 103 million barrels of oil per day, driven by increased air traffic and higher use of oil to produce power. Demand for oil from China for petrochemical production also contributed to demand.
• Mismatch between supply and demand. Although demand is increasing, OPEC+ has restricted output, which was around a two-year low in July.
• Energy transition could shift demand. The IEA believes that oil demand could continue to trend up this summer. Oil inventories in developed countries are below their five-year averages. But in the long term, the introduction of electric vehicles could alter demand.

As the world’s appetite for oil continues to break records, it highlights the remarkable ability of industries to adapt and evolve. Yet, the delicate equilibrium between supply and demand is a pivotal consideration, impacted by the calculated output restrictions implemented by OPEC+. In addition, the oil market will likely be heavily impacted by the energy transition and adoption of electric vehicles. With fluctuations in oil prices possible, it’s important to prepare your portfolio for alternative scenarios in the energy markets.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.