As OPEC+ output cuts and additional supply restraints from Saudi Arabia and Russia created a market deficit, oil prices increased by an average of 28% last quarter, reaching a 2023 high in September.
In a recent client note, JPMorgan analysts predicted a decline in petroleum oil demand in the current quarter due to the recent rally.
After reaching our target of $90 per barrel in September, our end-of-year target remains $86 per barrel, according to Natasha Kaneva, chief of JPMorgan’s global commodities strategy team.
In the final months of the year, Kaneva anticipates a modest increase in inventory, reversing the summertime decline.
The note titled “Demand destruction has begun (again)” states, “Moreover, demand restraint due to rising oil prices is once again becoming apparent in the U.S., Europe, and some EM nations.”
“China and India drove global oil demand growth this year,” analysts wrote. “However, after oil prices spiked in August and September, China decided to draw down domestic crude inventories.”
Possibly, consumers have reached their pain threshold for gasoline, a hydrocarbon derivative. In September 2023, the price of gasoline reached a record high due to a tightening crude supply.
“There are already indications that consumers have responded by reducing their fuel consumption,” Kaneva and her colleagues wrote.
On September 28, 2023, petroleum prices are displayed at a Mobil gas station in Los Angeles. In some areas of California, the price of gasoline is approaching $7 per gallon.
While US gasoline demand exceeded analysts’ expectations in the first half of the year, “the spike in gasoline prices in 3Q23 in turn depressed gasoline demand,” Kaneva explained.
As for diesel, the recent 30% price increase is primarily felt by construction companies, transportation companies, and producers, thereby increasing the cost of freight and food production.
Jet fuel costs increased during the third quarter, prompting United Airlines (UAL), Delta Airlines (DAL), American Airlines (AAL), and other airlines to issue warnings.
