Oil Demand Shows Slowing Global Economy

Let’s review the latest data on crude oil demand and supply through September, which continues to show that the global economy is slowing:

(1) Supply soaring to record high. Global oil supply jumped to a record 92.7mbd during September, a jump of 3.0mbd in just the last four months. Leading the way are the US and Canada, which are now producing 12.6mbd, well exceeding Saudi output of 9.6mbd.

(2) Demand stalling at record high. Global oil demand has been flat around a record 92.6mbd over the past five months, using the 12-month average to smooth the volatile data. The growth rate, on a y/y basis, has fallen from a recent high of 1.8% during September 2013 to only 0.6% this September.

(3) Demand falling in OECD, slowing in non-OECD. Among the 34 advanced economies in the OECD, demand fell 0.6% y/y after rising a bit briefly early this year. Demand has been falling at a faster pace among the big four economies of Europe and Japan too.

Demand among the non-OECD economies, which are mostly emerging ones, rose 1.8%, the lowest since August 2009. In China, usage rose to a record high of 10.2mbd during September, which was up 1.0% y/y, near August’s 0.7%, which was the lowest since November 2007. This confirms that China’s economy isn’t tanking, but it is slowing significantly. The same can be said for India, where oil demand was up just 1.2% y/y last month, the slowest since March 2006.

Today's Morning Briefing: Yin & Yang. (1) Yin is deflation. Yang is easy money. (2) Why can’t central banks boost inflation? (3) Easy credit has boosted supply more than demand. (4) Aging demography also weighing on Japan and Eurozone. (5) Secular stagnation is a serious problem in Japan and Eurozone. (6) Postmortem: Commodity super-cycle was latest bubble to burst. (7) Oil’s super-cycle is also over. (8) Global oil demand has stopped growing. (9) What is the breakeven price for shale oil producers? (10) Focus on underweight-rated S&P 500 Energy.