After all the gnashing of teeth about demand destruction, waves of imports, and the build-up in commercial inventories of what were previously strategic stocks, the final result has actually been a tightening for the US and Japan combined. Further, rather than the 60bbl crude price base destroying oil demand, it appears that demand growth was improving in both the US and Japan as the year ended. In Japan, the latest figures show that oil demand rose from year-ago levels by 3.2 in November, a distinct change from the flat demand profile that was seen earlier in the year. Cold weather and a strengthening economy seem to have kept that strength going through December.
More Quotes from Paul Horsnell:
The loss of short-haul heavy crude oil imports into the U.S. market is now becoming significant. None of that effect is currently in the U.S. weekly data, although it can be expected to depress imports in at least the next two weeks of data.Paul Horsnell
But the scale of the fall remains beyond that which would be expected, given the difference in supply lines, and regardless of its motivation it still raises the question as to how inventories for the driving season can be built in a timely fashion.
Paul Horsnell
It is lack of spare crude production capacity that turns Iran, Iraq, and Nigeria into fundamental issues. Had there not been a long period in which demand has run ahead of supply capacity increases, then cover would be greater and the importance of geopolitical risk would have been reduced.
Paul Horsnell
The shortage is in gasoline, so you would need to add huge amounts of crude oil to have even a minor impact on prices. This is a time when the shortage has nothing to do with crude oil, and OPEC cannot fix it.
Paul Horsnell
The issue of Iran's international relations continues to rise to the fore as a major potential area of market concern. It now seems likely that the EU3 of Germany, UK, and France will later this week abandon the mothballed talks with Iran.
Paul Horsnell
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