World Oil Demand - Jul 10
Source: OPEC_RP100706 7/15/2010, Location: Europe
Financials and Investment
World oil demand in 2010
The current economic situation in most developed countries remains sluggish. The economic recovery is not only slow, but also facing considerable uncertainty. The OECD region is not expected to achieve any oil demand growth this year due to a deep decline in European consumption. Recent May data indicates a cautiously improving
picture for most of the OECD compared to the first four months of the year.
North American oil demand seems to have finally stabilized for the year, basically due to an extremely low base in 2009 in combination with some economic recovery, whereas oil consumption in OECD Europe showed some improvement during May, but is still in the red. In OECD Pacific, strong April demand has been followed by a weaker May mainly due to easing consumption in Japan and South Korea.
All the growth this year in oil demand will be attributable to non-OECD, where consumption will exceed 1.0 mb/d.
World oil demand in the first quarter grew by 0.5 mb/d, leading to stronger growth exceeding 1.0 mb/d in each of the following three quarters of the year.
Given the slow world economic recovery, world oil demand growth is forecast at 0.9 mb/d or 1.1 %, unchanged from the previous MOMR.
OECD - North America
US product consumption was not as high in June as in May due to the higher base from last year. In general, US oil demand has stabilized and moved out of the declining trend seen last year. Given the shaky economy, the country’s oil demand has a strong chance of experiencing turbulence in the second half of the year.
The summer driving season has started, which would normally play a major role in oil consumption; however it is not expected to do much this season, as the country is still suffering from the economic crisis. The industrial sector experienced a massive decline last year as a result of slow manufacturing activities; nevertheless, it is expected to improve in the second half of the year.
The potential for growth over the next two months lies with the industrial sector, leading to higher industrial fuel consumption, as well as the summer driving season. US auto sales remained positive in May, achieving growth of 17.3% y-o-y; however June sales slid below May, reaching only 11.08 million units or 14.3% growth. The US auto industry has been on the road to recovery since the beginning of the year.
Sales grew by 19% in the first five months of the year due to the slight economic imrpovement but also government incentive plans. This growth is faintly reflected in the country’s gasoline consumption since driving mileage is not growing as much. It is not expected that this industry will see a quick recovery anytime soon.
In July, US weekly data showed some recovery in the consumption of industrial fuels, such as distillates and propane/propylene, due not only to the very low base last year but also from a moderate increase in industrial activity. Despite the recovery, the downward risk still exists, especially if the summer driving season does not yield its usual performance; hence, total US demand growth for the year is forecast at 0.3 mb/d.
Canadian oil demand experienced a contraction of as much as 0.1 mb/d in the second quarter of 2010 as a result of decreasing industrial activity and less oil usage in transportation. In contrast, Mexican oil consumption has been on an upward trend since the start of the year reaching 2.5% growth over the first half. Most of the growth is attributed to strong demand in gasoline.
For the whole of 2010, North American oil demand is expected to grow slightly by 0.3 mb/d y-o-y to average 23.6 mb/d, with most increases taking place during the second half of the year.
OECD - Europe
Although May consumption data showed an improvement, debt in several European economies and continued application of rigorous state tax policies on oil are suppressing European oil consumption and the situation is expected to be this way until the end of the year.
The contraction in demand in the Big Four European economies – Britain, France, Germany and Italy – was reduced in May, declining by only 84 tb/d compared to 420 tb/d in April. Stronger distillate demand in the Big Four,
driven by increased industrial production in Germany, was the main reason for the recent recovery in Big Four oil demand growth. Nevertheless, transportation fuel is still on the decline. Gasoline, jet fuel/kerosene and diesel consumption plunged by 115 tb/d, 79 tb/d and 59 tb/d respectively. Data for May indicated that Germany's oil
demand increased by 68 tb/d with distillates having the biggest share due to higher industrial production.
Official UK data for May showed a reduction in oil consumption of 0.1 mb/d with the transport sector being mostly affected. French and Italian oil consumption was both slightly contracting in May. In both countries, transportation fuel accounted for the bulk of the decline, whereas industrial fuel experienced slight growth.
The region’s total contraction in oil demand is forecast at 0.5 mb/d in 2010. However, the decline is expected to ease in the second half of the year. The economic downturn is still hammering the continent’s auto industry. The growth in auto sales late last year and early this year was attributed mainly to government stimulus plans.
Governments are hesitant to continue such plans, basically because they cannot afford bailing out the auto industry any further. May data indicated a decline in EU auto sales of 9.3%, however in total; the first five months of the year
still show minor growth of 1.9%. The expiration of the stimulus plan in Germany caused the country’s auto sales to plunge by more than a third. The German auto market is the largest in Europe and any large swing will certainly affect the whole European auto industry.
OECD - Pacific
Japanese oil consumption seems to have stabilized since January, reaching 1.3% growth in the first half of the year. However, this was up from the exceptionally low levels seen last year. This growth occurred due to the increase of crude use by power plants in May 2010. Furthermore, the Pacific experienced colder weather conditions in the first quarter, causing higher consumption of heating fuel. Despite this positive performance, Japan is not expected to see overall growth in its oil use this year. The economic slowdown has had a strong dampening effect on the
country’s energy use this year.
An increase in consumption in transportation and industrial fuels was obseved in the second largest oil consuming country in the OECD Pacific region, South Korea, in April. This offset the decrease in residual fuel oil consumption due to fuel switching.
As a result, the country’s overall oil consumption during the first half of the year was almost flat, compared to last year.
OECD Pacific oil demand is forecast to show minor growth in 2010, averaging 7.7 mb/d.
Developing Countries
India is again trying to remove retail price controls for petroleum products; however, due to political protests this new
pricing mechanism might not get implemented after all. Should domestic retail prices be increased, this will definitely
affect local demand for gasoline, diesel, kerosene and LPG.
India’s consumers are enjoying fuel subsidies as the country’s developing economy is dependent upon such subsidies.
The latest May data indicated strong demand, especially in transport fuel. Gasoline sales were positively affected by the country’s growth in new car registration, increasing by 12.6% y-o-y in May. India’s oil demand in the first quarter was unusually lower than normal; however, in April and May, they were extremely strong. The country’s total May oil consumption increased by 0.2 mb/d or 6.3% yo- y. India’s oil demand for the whole year is forcast to exceed last year’s consumption by around 4%.
Due not only to the low base last year, but also to its growing economy, Taiwan oil demand has grown in the first four months of the year, exceeding 13%. Almost all of this growth is attributed to the industrial sector. This movement is also seen in some of Asia’s Economic Tigers. Hong Kong oil usage experienced growth in the first four months of the year exceeding a 7% increase y-o-y; however, unlike Taiwan, most of the increase was due to high consumption of jet fuel/kerosene.
Given the strength in India’s oil consumption, oil demand growth in Other Asia for the total year is forecast at 0.23 mb/d or 2.3% y-o-y, averaging 10 mb/d.
Long-term projects are keeping Middle East oil demand on the rise. The region is maintaining its forecast growth of
0.23 mb/d or 3.2%. Iran’s recent data indicated minor growth in the country’s oil consumption ending a four-month decline.
Most of May’s increase in oil usage is attributed to both gasoline and fuel oil. Saudi Arabian oil demand cooled its
over-heating growth trend in May to only 2%. However, cumulative growth for the first five months reached 10.5% y-o-y, averaging 1.8 mb/d. Gasoline and diesel have been growing to a level of 8% and 7% y-o-y.
Brazilian oil demand grew sharply by 12% adding another 200 tb/d to the country’s oil demand. Gasoline and diesel oil demand inched up by 18% and 15% y-o-y. Due to the healthy growth in both Brazilian and Venezuelan oil consumption, Latin America’s oil demand is expected to grow by 2.3%, averaging 6.0 mb/d.
Developing Countries’ oil demand growth is forecast at 0.63 mb/d in 2010, averaging 26.7 mb/d.
Other regions
China’s over-heating economy has kept the country’s oil demand on a sharp incline. China’s oil demand growth reached 9% in both February and March, averaging more than 4% year-to-date. China has been using its oil storage off-and-on which makes it hard to estimate demand accurately. In June, the country imported less oil; however
it used its own stocks to satisfy its oil product needs which reached 3.9% growth y-o-y to average 8.7 mb/d. China’s second quarter oil demand is estimated to grow by 0.39 mb/d y-o-y. Almost all of China’s economic indicators exceeded expectations, pushing not only the country’s GDP to 9.5% growth but also the country’s oil usage to approach growth of 5.5% in 2010.
Given the strong economic activities, China’s oil demand growth is forecast at 0.45 mb/d in 2010 to average 8.6 mb/d.
World oil demand in 2011 The global economic recovery, which is expected to start during the second half of 2010, is projected to continue through the whole of 2011 with more or less even distribution among the four quarters. Consequently, the bulk of the recovery in oil demand will be seen approximately at the same pace in all four quarters,
with the exception of the first quarter, due to the low base in 2009 and 2010. As in the current year, next year’s oil demand growth will take place in the non- OECD, mainly China, India, the Middle East and Latin America. On the product side, the demand for industrial fuel will be strong as a result of the continuing economic recovery. Furthermore, demand for transportation fuels and petrochemicals are also expected to be strong. US gasoline demand is expected to be back in its normal growing mode; however there is considerable uncertainty about the pace of growth.
Any further delay in the country’s economic recovery will of course lead to a downward revision in the world oil demand in total. Other factors that might play an important role in next year’s oil demand are retail oil product prices, taxes and removal of retail price subsidies worldwide. World oil demand is expected to grow by 1.0 mb/d in 2011 to average 86.4 mb/d.
Industrial fuel, mainly diesel and naphtha, will be the products with the most growth in 2011 as the industrial sector will be the key driver of oil consumption. Coming from a rather low base in 2010, gasoline and jet fuel consumption will show increases, yet the bulk will come from the growing transport sector in non-OECD countries as well as some amounts from North America and the Pacific. Non-OECD demand growth of 0.95 mb/d will once again account for almost all of world oil demand growth next year, whereas OECD will show a moderate demand increase of 0.1 mb/d.
Total OECD is projected to increase 0.1 mb/d with Europe and the Pacific showing essentially no changes from 2010 volumes. North America’s oil usage is expected to increase by 0.2 mb/d. Oil demand in OECD Europe is expected to remain at 2010 levels, showing a minor decrease, mainly due to the very low base in 2009 and 2010. There will be a stagnant transportation sector and hence slightly decreased demand for motor gasoline and diesel. Winter product growth will partly offset declining gasoline, diesel and other industrial products along the year.
Furthermore, the OECD Pacific will continue to show further decline, as seen in 2010, due to less oil demand in Japan. Higher energy taxes, energy conservation, efficiency, alternative fuels and other factors are the main reasons for the decline in OECD demand. As a result of the continuing crisis in the US economy, North America’s oil demand is forecast to increase by only 0.2 mb/d in 2011 to average 23.8 mb/d.
India and the Middle East are estimated to show y-o-y oil demand growth of 0.1 mb/d and 0.2 mb/d respectively for 2011. Although agriculture, industrial and transport sectors are expected to be strong in India next year, the partial removal of price subsidies and other government policies are downside risks for oil demand growth in 2011. Transport, construction and petrochemical sectors will be the main drivers behind the strong Middle East oil demand next year as has been the case in 2010.
China is expected to contribute the most to world oil demand growth in 2011. China’s successful measures to minimize the negative effects of the world economic crisis will also continue in 2011. Its anticipated increase in retail fuel prices, biofuel usage and the building of more electric powered inter- and intra-city railroads will, to a certain
degree, affect the consumption of transport fuel next year. China is also planning to increase the use of nuclear and hydro-powered plants which will negatively impact the consumption of coal and oil. It should be noted, however, that other sectors in China which serve as major energy drivers — such as industrial production, in-land cargo, agriculture, construction, transportation and fishing — will show strong growth in 2011.
China will continue to achieve more energy efficiency in 2011 through the implementation of various efficiency agendas. China’s apparent oil demand is forecast to grow by 0.4 mb/d in 2011, 20 tb/d lower than the growth estimate for the current year.
|
