JP Morgan Analysts Look at August Oil Demand

Global oil demand averaged 104.7 million barrels per day in the first five days of August.

That’s what analysts at J.P. Morgan, including Natasha Kaneva, head of global commodities strategy at the company, said in a research note sent to Rigzone by the JPM Commodities Research team on August 6, adding that this figure was below their estimate of 104.8 million barrels per day for the month.

The analysts stated in the note that, year to date through August 5, global oil demand growth is tracking a 0.92 million barrel per day expansion against their estimates of 0.94 million barrels per day.

“Global oil demand through August 5 has averaged 104.7 million barrels per day, tracking a 300,000 barrel per day year over year growth, but 90,000 barrels per day below our forecast for the month,” the J.P. Morgan analysts highlighted in the note.

“For comparison, oil demand averaged 1.7 million barrels per day year over year growth in August during 2015-2019,” they added.

“Despite a slightly soft start to the month, relative to our expectations, high frequency indicators of oil demand suggest global oil consumption is likely to improve sequentially over the coming weeks,” they continued.

The analysts went on to state in the note that jet fuel and petrochemical feedstocks are anticipated to drive growth in oil consumption but warned that growth in demand for gasoline and diesel is likely to remain sluggish.

“In the first five days of August, global daily flights have increased by 4.3 percent compared to the same period last year,” the J.P. Morgan analysts said in the note.

“Concurrently, weekly air passenger throughput in the U.S. has risen for the fifth consecutive week ending on August 2 from year-ago levels, according to the TSA,” they added.

“Additionally, naphtha imports into East Asia (Japan, Korea, and Taiwan) have surged, increasing by 300,000 barrels per day from July’s low. In China, port cargo volumes grew by 5.4 percent in July following a subdued June,” they continued.

In the note, the J.P. Morgan analysts highlighted that, in the first week of August, visible OECD commercial oil inventories and Singapore stocks reported a seven million barrel draw.

“While crude oil inventories declined by 12 million barrels, oil product stocks increased by five million barrels,” they said.

“Year to date, these regions have reported a 42 million barrel rise in total liquid stocks, with crude oil increasing by 31 million barrels and oil products rising by 12 million barrels,” they added.

The analysts went on to state in the note that “Chinese stocks reported a two million barrel build last week”.

“Chinese crude oil stocks increased by 2.4 million barrels while oil product stocks declined marginally by 300,000 barrels, their first decline after eight consecutive weeks of builds,” the analysts pointed out in the note.

“Year to date, Chinese crude oil stocks have risen by 64 million barrels, while oil product stocks remain unchanged,” they continued.

In a J.P. Morgan research note sent to Rigzone on July 30 by the JPM Commodities Research team, analysts at J.P. Morgan said, year to date, global oil demand growth was tracking a 1.0 million barrel per day expansion against their estimates of 1.06 million barrels per day.

“For the month of July, global oil demand has averaged 105.4 million barrels per day, above our estimate of 105.3 million barrels per day for the month,” the analysts said in that note.

“Following a brief slowdown last week, global oil demand surged in the final week of July. This growth was primarily driven by increased demand for gasoline and jet fuel in the U.S., coupled with heightened trade and port activity in China,” they added.

“For July, global oil demand is projected to rise by 700,000 barrels per day year over year, slightly surpassing our initial forecasts for the month,” they continued.  

The J.P. Morgan analysts stated in that note that “high-frequency indicators of oil demand continue to signal sequential improvement”.

“In the U.S., weekly freight car traffic has reached a four-year seasonal high, while Germany’s truck toll index has grown in five of the last six weeks compared to the previous year,” they said.

“China’s daily flights have hit a five-month peak, standing 12.6 percent above 2019 levels. Additionally, July saw a five percent increase in cargo volumes from China compared to year ago levels, marking the strongest growth in three months,” they continued.

Also in that note, the analysts highlighted that, in the final week of July, visible OECD commercial oil inventories and Singapore stocks reported a nine million barrel build, which they noted was primarily driven by an 11 million barrel increase in crude oil inventories.

“Throughout the month, OECD and Singapore liquid stocks expanded by 23 million barrels,” the analysts said in the note.

“Year to date, these regions have reported a 49 million barrel rise in total liquid stocks, with crude oil increasing by 42 million barrels and oil products rising by seven million barrels,” they added.

“Chinese stocks saw a decline of 11 million barrels this week, led by a 12 million barrel drawdown in crude oil stocks. Meanwhile, Chinese oil product stocks marked their eighth consecutive weekly build,” they continued.

“Year to date, Chinese crude oil stocks have risen by 60 million barrels, while oil product stocks remain unchanged,” the analysts went on to state.

To contact the author, email andreas.exarheas@rigzone.com