Oil market traders have been having fun in recent weeks, as they have managed to create guaranteed price movements every week:
However, in the real world, these trading games are simply a distraction. Far more important is the massive change underway in world oil markets, as highlighted in the above chart of US oil imports:
These developments are naturally being ignored by the traders. But they go a long way to explaining why market share has become the prime objective for most oil exporters, as discussed in October's pH Report, 'Saudi Arabia needs much lower oil prices'.
Equally important is that the world is now arriving at 'peak oil demand'. As a new Bloomberg analysis confirms:
'Saudi leaders have worried for years that climate change and high crude prices will boost energy efficiency, encourage renewables, and accelerate a switch to alternative fuels such as natural gas, especially in the emerging markets that they count on for growth. They see how demand for the commodity that's created the kingdom's enormous wealth—and is still abundant beneath the desert sands—may be nearing its peak....'
Oil Minister Naimi told reporters in Qatar three years ago, 'Demand will peak way ahead of supply.'
Plus, of course, demographic shifts are already reducing US gasoline demand, as I noted last month:
A further headwind for demand growth is highlighted by the US Energy Information Agency's new Annual Report:
'The need for imports will further decline after 2020 as increased vehicle fuel economy standards limit growth in domestic demand.'
Saudi Arabia is clearly not being distracted by the oil traders' temporary excitement It knows it would risk being marginalised if it continued with the previous policy of cutting production to support prices. As Naimi noted last month:
'Saudi Arabia cut output in the 1980s to support prices. I was responsible for production at Aramco at that time, and I saw how prices fell. So we lost on output and on prices at the same time,' al-Naimi said. 'We learned from that mistake.'
Weekly Market Round-Up
My weekly round-up of Benchmark prices since the Great Unwinding began is below, with ICIS pricing comments: