Standard Chartered says crude oil demand set for record-high in May

Standard Chartered, one of the leading financial institutions, has projected that global oil demand is poised to reach an all-time high in May, according to their latest analysis. This forecast comes amidst ongoing geopolitical tensions and supply constraints in the energy markets.

The bank’s analysts have revised their previous estimates, anticipating a surge in oil consumption to unprecedented levels during May.

As a result of these factors, Brent futures extended their year-to-date gain to nearly $10 per barrel, trading at $85.93, while WTI crude reached $81.66 per barrel by Wednesday’s session.

J.P. Morgan analysts estimate that around 900,000 barrels of Russian refinery capacity have been impacted by the attacks, resulting in a risk premium of $4 per barrel being added to oil prices.

Key factors influencing this projection include stronger-than-expected demand growth observed in recent months, particularly in major economies recovering from the impacts of geopolitical developments, such as the conflict between Ukraine and Russia, which have raised concerns about potential disruptions to global oil supplies, further driving up demand.

According to the latest Joint Organisations Data Initiative (JODI) report, January saw a demand of 100.24 million barrels per day (mbpd), marking a 2.67 mbpd year-over-year increase. This exceeded StanChart’s previous forecast, leading them to revise their 2024 demand growth forecast to 1.69 mbpd.

StanChart predicts a sustained period of inventory draws in the first half of 2024, with demand indications remaining robust. They forecast global demand to reach new all-time highs in May, June, and August.

Regarding supply constraints, Standard Chartered predicts limited growth in US crude production and ongoing challenges in Russia’s oil system optimisation due to war damage and logistical constraints.

However, they anticipate that OPEC+ will have room to increase output starting in the third quarter without triggering an inventory build.

On the natural gas front, the latest data shows a modest recovery in European demand but remains below pre-pandemic levels. Despite record-high inventories, European gas prices rallied due to reduced liquefied natural gas exports and concerns about the security of Russian gas flows.