- Oil trades lower amid concerns of weaker demand
- WTI fell by nearly $1/Bbl this morning to trade below $85/Bbl
- China’s strict zero-Covid policy continues to weigh on oil demand
- The dollar continues to weaken relative to its recent 20-year highs
- The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of six international currencies) fell more than 3% last week to the lowest since August
- A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay less for the same amount of goods
- The IEA cautions that the diesel demand may decline in 2023 (BBG)
- The IEA, in its November monthly report, said that economic challenges would cause demand growth to decrease in 2023 to 1.6 MMBbl/d from 2.1 MMBbl/d this year and down 0.1 MMBbl/d from their prior forecast
- Fuel consumption is already beginning to feel the strain of rising prices, and this quarter's global demand is expected to decline by 0.240 MMBbl/d from last year's levels, the agency estimated
- The group also said that the high diesel prices would lead to a decline in demand growth for diesel from 1.5 MMBbl/d in 2021 to 0.4 MMBbl/d in 2022
- The organization continued to add that “The increasingly ominous global outlook, along with very high prices, is set to significantly curtail diesel demand in 2023”
- The IEA also warned that the EU’s upcoming sanctions on Russia might significantly reduce oil supplies
- The agency forecasts that Russian output will continue to decline by 15% in early 2023
- According to the IEA, Russia may struggle to find new markets for its oil after the EU ban goes into effect, potentially pushing the country's average output to fall below 10 MMBbl/d next year
- Russia has diverted more than a million barrels per day to India, China, and Turkey since many of its traditional customers fell away following the invasion of Ukraine
- However, recent stability in those flows has led to speculation that those nations may not be able to ramp up imports further
- The IEA also warned that the EU’s upcoming sanctions on Russia might significantly reduce oil supplies