One way of shaping the news is the framing of stories. Readers are sending articles on a daily basis pointing to a bullish bias in quite a few stories. In most, it not blatant, which is why I don’t parse them, here, in that it would seem like overkill. But in fact the subtle spinning of stories is far more insidious than the obvious sort that might trigger the BS detector of even a casual reader. It used to be the Wall Street Journal which was the prime offender, but Bloomberg has now taken the lead.
Another way to shape opinion is via placement, as in which stories get top billing, and which are put further back or not covered at all. One story that seems important but did not get prominent placement (no first page treatment at the Wall Street Journal or Financial Times, and no mention in the New York Times). The lack of first page positioning is less significant for the FT, since its Web redesign limits it to only a few articles. But by contrast, the Journal’s extensive front page headlines and summaries give the impression that a reader has scanned what is really important if he has looked over the first web page.
Energy use is generally considered a good benchmark of economic activity, so a reduction in the prediction undermines the “green shoots” thesis. A cut in the demand forecast, particularly from the IEAl All official agencies have overestimated both supply and demand growth, but the demand growth overestimates have been larger than for supply. It is also worth noting the IEA has done worse that OPEC, the most conservative. And note the outlook for demand growth for oil through 2014 is surprisingly low, a mere 0.6% per annum.
From the Financial Times:
The worst recession in decades will curtail oil demand for years to come, the International Energy Agency predicted on Monday as it cut sharply its forecasts for world consumption and declared that the threat of a supply crunch had receded.
The consuming countries’ oil watchdog said it expected global demand to grow at an average annual rate of just 0.6 per cent or 540,000 barrels a day from 2008-14, raising consumption from 85.8m b/d to 89m b/d.
This latest forecast is 3.3m b/d lower than the previous forecast for 2013 volumes. If the agency’s most pessimistic economic scenario proves correct, oil demand could contract, with consumption falling to 84.9m b/d by 2014, it said in a report.
The slowdown in demand growth means the crucial cushion of spare supply the Opec oil producers’ cartel holds is now expected to reach 7.78m b/d next year, or 8 per cent of global demand. Last year, the IEA expected surging energy usage to reduce that supply cushion to 1.67m b/d….
The IEA cautioned against putting too much faith in hopes of a swift economic recovery, which have pushed the oil price back up towards $70 a barrel from half that level in February. It said that economic “green shoots” could be accounted for by stock rebuilding across industries after a steep drawdown of inventories….
Total non-Opec supply was projected by the IEA to fall 400,000 b/d from 2008 to 50.2m b/d in 2014, with deferred or cancelled investments in oilfields the main reason for the decline.
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The MSM's unwillingness to highlight anything bearish on energy is nothing new; it antedates this economic crisis.
As for the IEA and EIA, after years of rather absurd bullishness on oil supply, they've finally, over the last two years, started to admit that there might ever be a supply issue.
But they're still averse to admitting that the true Peak Oil effect, demand attempting to exceed supply, could ever happen.
So they're happy to go along with the projection of long-term depressed demand as a result of the economic crisis. This nicely maintain the surplus capacities in their projections.
But it's unlikely they actually put more analysis into this than they used to in the old bullish days (like five years ago) where they used to simply project the existing demand curve into the future, and assume that Arabia would magically produce that amount.
"It said that economic “green shoots” could be accounted for by stock rebuilding across industries after a steep drawdown of inventories…."
I have no idea what this means considering that oil stocks are bursting at the seams.
attempter, I prefer the EIA to the IEA for the numbers I use, but I agree that both act as if peak oil doesn't exist, which is troubling.
My third iron law of oil is that in the short term it is vastly overpriced and in the long term ridiculously underpriced.
Thanks Yves. I guess all those tankers full of stored oil will really trash things when they decide to unload those positions. WTH does JPM and the likes have owning physical inventory? I hope they get creamed.