Oil:Demand destruction has begun:JPMorgan Analysts

In a stark assessment of the global oil industry, analysts from JPMorgan Chase & Co. have declared that "demand destruction has begun," signaling a potential shift in the energy landscape.Oil rallied an average of 28% last quarter, jumping to a 2023 high in September, as OPEC+ output cuts and further supply restraints from Saudi Arabia and Russia created a deficit in the market.Expect crude demand to decline this quarter following the recent rally, JPMorgan analysts said in a recent client note."After reaching our target of $90 in September, our end-year target remains $86 [per barrel]," wrote Natasha Kaneva, head of the global commodities strategy team at JPMorgan.Kaneva said the inventory draws seen during the summer will turn into a slight build in the final months of the year.

“Moreover, demand restraint from rising oil prices is once again becoming visible in the US, Europe, and some EM countries,” reads the note titled "Demand destruction has begun (again)." “China and India drove global oil demand growth this year, but China opted to draw on domestic crude inventories in August and September after oil prices surged,” wrote the analysts.Consumers may have met their pain threshold for gasoline, a derivative of oil. The price of gasoline hit a 2023 high in September amid a squeeze on oil supply.As for diesel, the note highlights the recent 30% price surge in prices is mostly felt by construction companies, transportation businesses, and farmers, increasing the cost of freight and food production.
On Sept. 27, West Texas Intermediate (CL=F) surpassed $93 per barrel, and Brent International (BZ=F) futures rose above $96 per barrel in new highs for the year, according to reports.Prices have pulled back since then. On Wednesday WTI futures dove more than 5% to settle at $84.22 per barrel. Brent also dropped to close at $85.81 per barrel, according to report. 
India should accelerate energy transition, but affordability and jobs remain key concerns: Alok Kumar, former Power Secretary 
As the world grapples with climate change, India should accelerate its energy transition but not at the cost of affordability and job security, Alok Kumar, former Secretary (Power) of India, said at the Economic Times India Net-Zero Summit.Kumar, highlighting the fiscal challenge, remarked that an average Indian household spends almost double its income percentage on energy compared to a Canadian household. The crux of the matter, as he sees it, lies in energy security and a significant reduction in India's reliance on oil and gas imports.
The Niti Aayog, a policy think tank of the Indian government, has projected that despite all measures, by 2047 India will import 79% of its oil needs, a significant increase from the present levels. "If you truly want to safeguard your energy future, reducing import dependence is imperative," Kumar emphasized.However, he expressed significant concerns about inadvertently exporting jobs due to energy transition measures."It's unacceptable to import solar modules, electrolysers, and batteries from nations like China and see our job opportunities shrink. We need green jobs right here in India."
Electrification, according to Kumar, will be the backbone of India's energy transition. While there is a drive to ramp up renewable energy, he voiced concerns over the affordability and domestic production of battery storage,according to sources.Kumar lauded the steps taken by distribution companies in the energy sector, especially the automatic fuel and power purchase cost adjustment, terming it a game-changer. "This move has effectively depoliticized power tariffs in India," he said. However, challenges persist, especially in establishing an effective EV charging infrastructure in densely populated urban areas, according to media reports.
Kumar also emphasized the need for support, especially for the MSME sector, as they transition to more energy-efficient systems. The government is actively considering proposals to incentivize the adoption of efficient projects for these businesses.

(Ira Singh, Asstt Editor)