Nov. 7 (UPI) — Crude oil prices lingered slightly in negative territory in early Tuesday trading after OPEC said it saw demand increasing, but some deceleration ahead.
Economists at the Organization of Petroleum Exporting Countries painted a mixed picture on long-term trends in the energy market, but noted some of the shift is coming from an Asian pivot for economic growth. Short-term demand for oil, through 2022, was revised higher by 2.24 million barrels per day, compared with the organization’s World Oil Outlook from last year.
“Global oil demand growth is forecast to decelerate steadily to a level of only 300,000 barrels per day every year between 2035 and 2040,” the report added.
Crude oil prices were relatively muted in early Tuesday trading. A rally Monday was triggered by lingering geopolitical uncertainty in the Middle East. Tensions between Saudi Arabia and Lebanon are intensifying, and Riyadh is in the midst of a major crackdown that has spooked some investors.
The price for Brent crude oil was down 0.28 percent to $64.09 per barrel as of 9:20 a.m. EST. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.17 percent to $57.25 per barrel.
OPEC economists said they lowered their long-term forecast in part because of an expected decline in the global economy, structural shifts and “fuel switching, particularly in the road transportation sector.”
The fuel switching reflects trends toward electric and alternative vehicles, which still make up for a small fraction of the global transportation fleet. OPEC economists said alternative-fuel vehicles made up about 2 percent of the market last year and will increase to 16 percent by 2040.
Through 2022, demand accelerates, but the pace of growth wanes as the decade draws to an end.
“It should be noted that global annual demand growth decelerates from 1.45 million barrels per day in 2017 to 810,000 barrels per day in 2022, as expected higher oil prices, efficiency improvements, lower population growth rates in the OECD and China, and the further penetration of alternative fuel vehicles limit growth potential,” economists said.
Traders may be erring on the side of caution and taking a short-term approach to the market ahead of data on U.S. oil and gasoline inventories. A survey of analysts from commodity pricing group S&P Global Platts found crude oil stocks may decline in the United States by another 2.7 million barrels, while gasoline stocks could drop 2.25 million barrels.
“If confirmed, it would mark the sixth draw in the last seven weeks, and further narrow the surplus to the five-year average, which equaled 14.6 percent in the week ended October 27, down from 25 percent in mid-September,” the emailed market report read.
The surplus matters for OPEC, which is working to drain the excess with managed production declines. Ministers are widely expected to call for an extension of an agreement to trim output through the end of 2018, though recent geopolitical tensions could make reaching a comprehensive decision complicated.