The omens aren’t good. The U.S. government expects global consumption to grow next year at less than half the rate of 2010, when the world was emerging from a previous recession. The growth is insufficient to close the gap with rising supply, according to Royal Dutch Shell Plc, Europe’s biggest energy producer.
The last time oil crashed, during the 2008 financial crisis, China’s appetite for commodities seemed insatiable, and powered prices higher. This time, Chinese fuel use is growing at half the rate of the past decade, and sliding U.S. shale output could reverse as prices rise, smothering the gains.
“The recent rally appears driven by investors looking at catching the bottom of the market and the expectation that U.S. oil production has reached a turning point,” said Harry Tchilinguirian, BNP Paribas SA’s London-based head of commodity markets strategy. “But fundamentals, notably in the U.S., have not changed much.”
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Slowing Demand
Global oil demand will grow just 1.3 million barrels a day to 94.58 million next year, the Energy Information Administration said Tuesday. It jumped 2.89 million in 2010 after the previous price crash.
In the U.S., consumption will increase 0.4 percent next year to 19.44 million barrels a day, leaving it at a lower level than in 2008.
“There are pockets of strength, but the days where we saw greater than 1.5 percent oil demand for a year are probably largely behind us,” said Michael D. Cohen, an analyst at Barclays Plc in New York.
Read more at Oil's Not Coming Back. Here's Why
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