Yahoo Finance Gasoline 'demand is quite weak', energy analyst tells Yahoo Finance Live
Weak demand is keeping a lid on oil prices. Just take look at gasoline for proof, OPIS global head of energy analysis Tom Kloza told Yahoo Finance Live.
"Demand is quite weak. It's lower than last year for gasoline," he said (see video above). "We're using about 365 million gallons a day, and normal would be probably around 390 [million]."
The oil analyst also noted demand for diesel "is very soft."
Freight bellwether UPS (UPS) recently warned of strained parcel volumes — about a week after trucking giant JB Hunt's executives highlighted a "freight recession."
"We're in a challenging freight environment, where there is deflationary price pressure for an industry that continues to face inflationary cost pressures. Simply stated, we're in a freight recession," Shelley Simpson, president of JB Hunt Transport Services (JBHT), told analysts during the company’s earnings call on April 17.
Kloza said disinflation is at work in the oil patch, but not necessarily everywhere else in the economy.
In early April, the Organization of Petroleum Exporting Countries and its allies, including Russia, announced cuts of more than 1 million barrels a day starting in May. Prices for West Texas Intermediate (CL=F) and Brent (BZ=F) crude futures jumped on the announcement but have come down from those levels since then.
"There's a lot of oil out there," said Kloza. "OPEC+ has a real problem. It's hard to root for them, but they have a problem in terms of stabilizing prices for the rest of the year."
The analyst pointed out that Russian oil has seeped into the marketplace despite Western sanctions on Moscow over the war in Ukraine.
"People thought that Russian oil wasn't going to get to the market. It's getting to the market. As a matter of fact, Russia is probably stealing business for us in diesel in Latin America, particularly in Brazil. So that's one of the things that a lot of people didn't count on," said Kloza.
Some analysts have predicted higher oil prices as China continues to open its economy after its severe COVID lockdowns. However, Kloza doesn't see the reopening as solving a potentially bigger demand problem.
"It's not the panacea for the world's ill right now," said Kloza. "We get a debacle in the financial markets, it will definitely have collateral damage in oil. "
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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