Oil: Demand elasticity estimates point to limited relief – Societe Generale

💡 DMK Insight

Oil prices are climbing, but demand isn’t budging much, and here’s why that matters: Societe Generale’s analysis highlights that oil demand is structurally inelastic, meaning consumers aren’t cutting back significantly even as prices rise. With a short-run demand elasticity of –0.024, the current price increases have only led to a loss of about 1.2 mb/d in consumption. However, if prices push toward $150/bbl, we could see a more drastic reduction of up to 2.7 mb/d. This scenario could trigger a ripple effect across related markets, particularly in energy stocks and commodities. Traders should keep an eye on crude oil futures, especially if they approach that $150 mark, as it could lead to volatility in both oil and broader equity markets. But here’s the flip side: if demand remains resilient, it could support higher prices for longer, benefiting oil producers and related sectors. Watch for any shifts in consumer behavior or economic indicators that might signal a change in demand dynamics. Key levels to monitor include current price movements and any geopolitical events that could impact supply. In short, keep your eyes on the $150/bbl threshold and the potential for significant demand shifts in the coming weeks.