Peak Oil Demand? Not So Fast! Goldman says oil demand will soar till 2034 🚀

The landscape of global oil demand is marked by differing projections from leading energy analysts. While the International Energy Agency (IEA) anticipates a peak in global oil demand by 2030, Goldman Sachs projects that demand will continue to rise until 2034. This divergence in outlook stems from varying assessments of energy consumption drivers, particularly the increasing energy needs driven by artificial intelligence (AI) and rising global incomes.

Goldman Sachs’ Extended Demand Forecast

Goldman Sachs, a prominent investment bank, foresees global oil demand peaking a decade later than the IEA’s prediction. According to Nikhil Bhandari, co-head of Asia-Pacific Natural Resources and Clean Energy Research, and energy analyst Amber Cai, “We think peak demand is another decade away, and more importantly, after the decade it takes to peak, it plateaus, rather than declines sharply, for another few years.” This projection suggests a sustained appetite for energy supplies, predominantly met through increased fossil fuel consumption.

Investment Trends Reflecting Optimism

The investment patterns of some of the world’s savviest investors align with Goldman Sachs’ bullish outlook on oil demand. Warren Buffett, renowned for his strategic investment decisions, has significantly increased his holdings in the energy sector. After bolstering his $18 billion position in Chevron last year, Buffett invested an additional $434.8 million in Occidental Petroleum in June, bringing his total stake in the company to 28.8%, or over 255 million shares.

Billionaire hedge fund manager David Tepper echoes this sentiment. Tepper has reportedly added more than $800 million worth of shares in Occidental Petroleum, Energy Transfer LP, and PG&E Corporation to the top 12 holdings in his portfolio. Mexican billionaire Carlos Slim is also making strategic moves in the energy sector. His firm, Empresarial de Capitales, has invested over $150 million in PBF Energy, one of America’s largest independent energy refiners. PBF Energy, with its extensive distribution network and refineries, currently offers a 2.3% dividend yield.

The Implications of Savvy Investments

These investment decisions by Buffett, Tepper, and Slim, three of the world’s most successful investors, suggest a potential upside in the energy sector. Their substantial stakes in oil and gas companies indicate confidence in the continued profitability of fossil fuels, despite the projected slowdown in demand growth.

Forecasts from Major Energy Agencies

The IEA expects a deceleration in global oil demand growth, forecasting an increase of 1.2 million barrels per day (mb/d) in 2024 and 1.1 mb/d in 2025. This represents a significant slowdown compared to the robust growth of over 2 mb/d annually seen in 2022 and 2023.

U.S. Energy Information Administration (EIA) Estimates

The U.S. Energy Information Administration (EIA) provides a slightly lower forecast, predicting global consumption of liquid fuels will increase by 1.1 million b/d in 2024 and 1.5 million b/d in 2025. These projections, while indicating growth, suggest a gradual slowdown in the rate of demand increase.

OPEC’s Optimistic Outlook

In contrast, OPEC maintains a more optimistic stance on future oil demand. OPEC forecasts a substantial surge in global oil demand, predicting an increase of 2.25 million b/d in 2024. This outlook underscores the organization’s confidence in the continued expansion of oil consumption.

Factors Influencing Demand Growth Slowdown

Several factors contribute to the anticipated slowdown in global oil demand growth. The normalization of growth following the disruptions caused by the COVID-19 pandemic and the global energy crisis is a primary factor. Additionally, China’s post-COVID rebound is losing momentum, with its contribution to global demand growth expected to fall to 540,000 b/d in 2024.

Stabilization in Aviation Fuel Demand

The recovery in air traffic and aviation fuel demand is also stabilizing, contributing to the deceleration in overall oil demand growth. Increased deployment of clean energy technologies and oil-substituting technologies, such as electric vehicles and high-speed rail, particularly in China, further dampens the growth in oil consumption.

The Path Forward for Oil Demand

Despite the projected slowdown, the level of oil demand growth remains largely in line with pre-COVID trends. However, the IEA suggests that this deceleration could bring a peak in consumption into view this decade. This potential peak aligns with the agency’s broader narrative of transitioning towards more sustainable energy sources.

S&P Oil & Gas Expl & Prod SPDR (XOP) Technical Analysis

Price Trend: The chart shows a downward trend since mid-June 2024, with the current price at $142.64. The 50-day moving average (red line) is around $149.83, while the 200-day moving average (blue line) is approximately $145.08. The price has crossed below both moving averages, indicating a bearish trend.

Volume: Volume data shows relatively high trading activity, particularly on down days, suggesting strong selling pressure.

Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI): The RSI is at 39.48, which is below the midpoint of 50, indicating that the stock is closer to being oversold. However, it’s not yet in the oversold territory (below 30), suggesting there might still be some downside potential.

On Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV): The OBV is trending upwards, but has recently flattened, indicating a potential decrease in buying pressure.

Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More: The Stochastic RSI is at 0.180, which is in the oversold territory. This could indicate a potential rebound or at least a pause in the downtrend.

Average Directional IndexThe Average Directional Index (ADX) stands as a cornerstone indicator in the toolkit of technical traders, offering insights into the strength of market trends. Developed by Welles... More (ADX): The ADX is at 13.76, which is a low value, suggesting that the current trend is weak and there may be a lack of strong directional movement.

Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More: The Chaikin Oscillator is at -1,072,336, indicating strong distribution and selling pressure.

Key Levels:

Support: Around $142, which aligns with recent price action lows.
Resistance: The 200-day moving average at $145.08 and the 50-day moving average at $149.83.

Time-Frame Signals:

3-Month Horizon: Sell. The stock is showing bearish signs with strong selling pressure.
6-Month Horizon: Hold. If the stock can stabilize around support levels, there might be potential for consolidation.
12-Month Horizon: Buy. If the stock can recover and move above the moving averages, it could resume an upward trend.

The stock is currently in a bearish phase with strong selling pressure. The indicators suggest that while it is oversold, the trend is weak and uncertain in the short term. Investors should closely monitor the support and resistance levels for signs of stabilization or further decline.

Past performance is not an indication of future results. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Looking Ahead

The future of global oil demand is shaped by a complex interplay of technological advancements, economic growth, and strategic investments. While Goldman Sachs and prominent investors like Buffett, Tepper, and Slim foresee continued demand and profitability in the oil sector, major energy agencies like the IEA and EIA anticipate a gradual slowdown and eventual peak in consumption. As the world navigates these divergent forecasts, the energy sector remains a focal point for investors seeking to capitalize on evolving market dynamics.