We await the IEA report today, but thus far the EIA Short Term Energy Outlook (STEO) have shown accord in how China's oil demand continues to shrink. Indeed, the EIA now forecasts India to be the major source of oil demand in 2024 and 2025, accounting for 25% of total oil consumption growth globally. Next year might be a year of India, instead of China watching. There is an adjustment higher from 900kbpd for world demand to 1mbpd for 2024 which increases to 1.2mbpd in 2025. However, there is a warning on how production is set to match. The US alone will average 13.23mbpd in 2024, up from 12.93 in 2023 and will again grow to 13.53mbpd in 2025. Although OPEC+ cuts will aid prices in the short-term if they remain in place, the increase in global production forecasts by 100kbpd to 102.6mbpd and by 200kbpd to 104.7mbpd in 2025, will see inventories start to build as soon as 1Q25 and by 2H25 Brent prices are forecast to fall to $74/barrel. 

The report, as was the case after the OPEC monthly, has little noticeable effect on prices and oil practitioners are given time to wait for the IEA to assess all three in the round. In terms of oil inventory, the API signposts a reduction in crude oil stock with a draw of 0.8mb against an expected small build and there is a draw of 1.9mb in Cushing against a TankWatch measure of -709kb. However, oil prices remain subdued, due to reports from Iran that it is considering postponing any attack response on Israel in an effort to open negotiations with President-Elect Trump, and likewise, Israel is making noises in a similar fashion toward a Lebanon ceasefire. What also ails oil price progression is the flying US Dollar. It is confirmed that the Republicans have secured the House of Representatives and with a clean sweep of all 3 legislative bodies, the new US President can go about his business largely unfettered. Being deemed in some quarters as inflationary, this then brings into doubt how quickly interest rates will be cut and consequently the US Dollar Index (DXY) at 106.62 this morning is at 2-year highs.

Green agendas will rightly keep pushing, pragmatism will rightly push back

Recently, we touched upon how the oil and automotive industry have been experiencing push back from placing time targets on when energy transition in its many forms would be implemented. So much so that there has been abandonment of 2030 as zero-emissions target or migration of all cars from combustion engines to those of electrical drives. There continues to be a great spread of pragmatism from around the world and setbacks for the green lobby are coming from both national attitude and legal corners.

COP29, the Conference of the Parties, is an annual event of the UN Framework Convention on Climate Change (UNFCCC). The annual meeting is an opportunity to bolster action against climate change and measure if protagonists are scaling up the global response to climate change and garnering support for greater ambition from governments. A recent report from UN Climate Change shows that current nationally determined contribution plans (NDCs) are still dangerously off-track to avert, in its opinion, the crippling effects of climate change on every country and every economy. The host city this year is Baku, Azerbaijan and as with all of these shows of national virtue, Ilham Aliyev, the President of Azerbaijan in welcoming literature spoke on the international community's respect for Azerbaijan and the work it does, including activities in the field of green energy.

COP29 is set to continue for another week and half, but it is a safe bet that nothing will match the about face of welcome from Mr Aliyev. Descending the opening day into something of a farce, the President regaled the conference with an honesty that most of the green-blooded attendees might find distasteful indeed. Obviously riled by criticism on its use of natural resources, and to pick out some of the meatiest ripostes, he vented, “Nations should not be judged by their natural resources and how they use them. Quote me that I said that this is a gift of God, […] oil, gas, wind, sun, gold, silver, copper, […] countries should not be blamed for having them or bringing them to market.” A contemplation of the Almighty through national geological assets is beyond our remit, but is it not a truth that wealthier nations by piling pressure on developing ones through restrictions on fossil fuels harm their future? Afterall, to implement transition it needs firstly to be funded.

It is also a rather inconvenient happenstance that on the very first day of the COP29 gathering, publication of a ruling in the Hague, Netherlands, can only be seen as a kick in the teeth for those set on using legal means to force gas and oil giants into transition submission. Shell, the Anglo-Dutch oil major, had been waiting on its appeal against a ruling from 2021 requiring it to enter a program of emission reduction at a much faster rate than it had thus far planned. The 2021 ruling had required Shell to reduce emissions in their own operations, its energy use and supply to customer base. The company argued, and ultimately successfully, that emission standards are for a government to set, not a court, and enforced new emission limits would impair its ability in reaching ‘net-zero’ by 2050. With the appeal court upholding Shell’s case, similar legal battles against other global oil giants just took a determined turn toward reality.

Back at COP29, and in interview with Bloomberg, Exxon’s CEO spoke on the challenges faced in the oil and gas industry in implementing emission controls. Demand for oil, gasoline and diesel is at a record high and he intimated at while it was correct to seek transition opportunities, it should not be done in a way that would harm energy flow in all its forms. Within a question on AI, he spoke on energy poverty which again chimes with how good intent and ideology must take into account the costs of implementation on the poorer citizens of the globe and national development in countries such as Azerbaijan.

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