‘Demand destruction has begun’, say JPMorgan analysts

Oil rallied a mean of 28% final quarter, leaping to a 2023 excessive in September as OPEC+ output cuts and additional provide restraints from Saudi Arabia and Russia created a deficit available in the market.

Anticipate crude demand to say no this quarter following the latest rally, JPMorgan analysts mentioned in a latest shopper be aware.

“After reaching our goal of $90 in September, our end-year goal stays $86 [per barrel],” wrote Natasha Kaneva, head of the worldwide commodities technique group at JPMorgan.

Kaneva says stock attracts seen throughout the summer season will flip right into a slight construct within the ultimate months of the yr.

“Furthermore, demand restraint from rising oil costs is as soon as once more changing into seen within the US, Europe, and a few EM nations,” reads the be aware titled “Demand destruction has begun (once more).”

“China and India drove international oil demand development this yr, however China opted to attract on home crude inventories in August and September after oil costs surged,” wrote the analysts.

Customers could have met their ache threshold for gasoline, a spinoff of oil. The worth of gasoline hit a 2023 excessive in September amid a squeeze on oil provide.

There are already indicators that customers have responded by slicing again on gasoline consumption,” wrote Kaneva and her group.

Gas prices are seen at a Mobil gas station in Los Angeles on September 28, 2023. California gas prices are nearing USD $7 per gallon in some locations as oil prices surge toward $100 a barrel. (Photo by Robyn Beck / AFP) (Photo by ROBYN BECK/AFP via Getty Images)

Gasoline costs are seen at a Mobil gasoline station in Los Angeles on September 28, 2023. (Robyn Beck / AFP through Getty Pictures)

Whereas US gasoline demand got here in above the analysts’ forecast within the first half of the yr, “the spike in gasoline costs in 3Q23 in flip depressed gasoline demand,” added Kaneva.

As for diesel, the be aware highlights the latest 30% worth surge in costs is usually felt by development firms, transportation companies, and farmers, rising the price of freight and meals manufacturing.

Jet gasoline additionally rose within the third quarter, prompting warnings from United Airways (UAL), Delta (DAL), American (AAL), and different airways impacted by increased prices.

On Sept. 27, West Texas Intermediate (CL=F) surpassed $93 per barrel, and Brent Worldwide (BZ=F) futures rose above $96 per barrel in new highs for the yr.

Costs have pulled again since then. On Wednesday WTI futures dove greater than 5% to settle at $84.22 per barrel. Brent additionally dropped to shut at $85.81 per barrel.

Ines Ferre is a senior enterprise reporter for Yahoo Finance. Observe her on Twitter at @ines_ferre.

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