Higher oil demand expected despite a feeling of anxiety

a year later,” he said. So with about 390 rigs added since the trough in May 2016, the US is “set up for a strong supply growth next year” that could exceed 1 million barrels a day.

In the note, Rats pointed out that the “US rig count recovery has recently overtaken even the stellar rebound” the market saw after the 2008/2009 downturn, “which was supported by oil prices rallying from $45 to $85/bbl within a year.”

The world's biggest independent oil trader, the Vitol Group, is also now underlining; demand isn’t expanding as much as expected, and US shale output is growing faster than forecast, Bloomberg reported. As a logical outcome, that’s increasing the burden on the major global producers, who need to stick to their pledges to cut supply, so as to keep prices from falling, said Kho Hui Meng, the head of the company’s Asian arm.

But the biggest variable is demand, and that is not enough: “What we need is real demand growth, faster demand growth,” Kho, the president of Vitol Asia Pte., said in an interview in Kuala Lumpur. “Growth is there, but not fast enough.”

The problem in a nutshell: originally, oil consumption, or demand, was forecast to expand this year by about 1.3 million barrels a day, growth has been limited to about 800,000 barrels a day so far in 2017, Vitol's Kho said, adding that US output had grown 400,000-500,000 barrels a day more than expected. “If demand goes back to where it should, where it’s forecast, then it’ll help, but my gut feel tells me it is still a bit long,” he said.

“The oil market is looking for growth but there’s no growth,” Kho added. And while US gasoline consumption is expected to hit its seasonal summer peak soon, demand growth “is not there yet,” he said.

“I am still watching the US summer gasoline demand,” Kho said. “OPEC has said it will try and extend its output cuts beyond June. So if that happens, and the discipline is good, and if the US lack of growth in demand changes in summer, then we may see oil go back to the low $50s, but the prevailing mood today is not.”

Oil producers seem banking on this. Saudi Arabia expects 2017 global consumption to grow at a rate close to that of 2016, Energy Minister Khalid Al-Falih emphasized last week. “We look for China’s oil demand growth to match last year’s, on the back of a robust transport sector,” he said in Kuala Lumpur. Some others are chipping in too. Sanford C. Bernstein & Co. also doesn’t appear concerned. Growth in the nation’s car fleet will support gasoline demand, with increasing truck sales and air travel also helping fuel consumption, it said in a report dated May 9. Falih has thus a point.

Yet, a number of ifs continue to haunt the oil markets today, one needs to concede now.