Never mind those EVs – oil demand keeps growing

LIKE clockwork, the commodities market worries in May about the strength of oil demand heading into the northern hemisphere summer holiday. Nervousness about the seasonal pickup in oil consumption abounds. It happened in 2023, and it’s happening again this year. But as before, traders’ concerns are misplaced: Oil demand growth is doing just fine.

The anxiety is reflected in the price of Brent crude, the global oil benchmark, which has dropped to less than US$85 a barrel in recent days, down from about US$90 a barrel in April. With the Opec+ oil cartel meeting on Jun 1 to decide whether to prolong production cuts, the status of global demand matters. The group should look beyond the current noise and see that consumption remains firm.

Admittedly, there are pockets of demand weakness. The middle distillates fuel segment, which includes diesel and heating oil, has seen soft consumption so far this year. But that’s largely due to a warm winter in the northern hemisphere, which reduced heating needs, rather than underlying economic malaise.