World oil demand
The latest estimates based on preliminary data for the first quarter of 2013 indicate
that the increase in world oil demand was lower than projected in last month’s MOMR.
As a result, world oil demand growth has seen a downward revision of around 80,000
b/d from last month’s report. However, the picture differs within the regions: OECD and
China have been revised down by 90,000 b/d and 20,000 b/d respectively, while other
non-OECD countries have been revised up by 30,000 b/d.
This has led to total growth of 0.9 mb/d in 1Q13 for global oil demand, a much higher
increase than 0.4 mb/d during the same period a year earlier. Growth in the second
quarter is projected to be lower at 0.6 mb/d as a result of last year’s high baseline –
resulting mainly from direct crude and residual fuel burning for electricity generation in
Japan. Growth in 3Q13 and 4Q13 is projected to be 0.9 mb/d and 0.8 mb/d,
Looking at absolute volumes, total demand is expected to average 89.0 mb/d in the
first quarter, before declining to 88.6 mb/d in the second. The latter half of the year will
see much higher oil use, reaching 90.1 mb/d and 90.9 mb/d in the third and fourth
quarters, respectively. For the whole year, world oil demand growth is expected to
increase by 0.8 mb/d to average 89.7 mb/d, unchanged from the previous assessment.
However, risks to the current forecast are skewed to the downside, not only in the
OECD but also in the non-OECD, especially China. Indeed, risks to the OECD forecast
remain firmly on the downside driven by ongoing downward revisions in the economic
outlook for the Euro-zone area. At the same time, weaker-than-expected economic
growth in China in the first quarter and the potential difficulty in achieving 8% growth this
year may dent oil demand consumption.
For the OECD, the downward revision incurred in the first quarter was attributed to
Europe and Japan, while the US saw an upward revision from the previous assessment.
Recent statistical data for the US suggests positive growth during the first three months
of this year for the first time since 1Q11. For the whole year, OECD Americas oil
demand growth is expected to be flat, following a decline of nearly 0.3 mb/d in 2012.
In OECD Europe, the huge decline in oil demand last year seems to have eased in
1Q13, leading to a contraction of 0.3 mb/d compared with minus 0.5 mb/d in 2012.
However, the ongoing financial crisis in the region may further reduce oil consumption.
For Japan, March data indicated a decline in domestic consumption of 0.2 mb/d, driven
by lower direct burning demand and lower fuel oil consumption. Although power sector
demand for petroleum products remained higher than before the triple catastrophe, the
expected new guidelines for nuclear safety to come in July from the Nuclear Regulation
Authority may imply lower oil use in the power sector by the latter part of the year. For
the Asia Pacific region, oil demand is projected to decrease by 0.1 mb/d for the whole
year, reversing higher positive growth of 0.35 mb/d in 2012.
Recent data for Chinese apparent oil demand dropped significantly between January
and March, with March slowing to the most sluggish rate in seven months. Indeed,
March apparent oil demand grew by just 2.0% compared with last year, a further
deceleration from the average growth rate of 4.3% in the first two months of this year.
This likely reflects some weakness in Chinese economic activity. The release of
Chinese GDP data for 1Q13 came in below consensus at 7.7% versus an expected
8.1%, and down from the 7.9% set in the final quarter of 2012. The increased risk that
Chinese oil demand growth will remain relatively weak in coming months is in line with
the lower expected April PMI of 50.5 versus the consensus expectation of 51.5.
In contrast to disappointing data from China, India’s oil demand returned back to normal
growth of 2.1% in March. This, combined with gradually improving economic activity in
the rest of non-OECD Asia, will result in oil demand increasing by around 0.2 mb/d this
Brazil also saw healthy growth of 0.1 mb/d in February, following three consecutive
months of growth. For the whole year, Latin America is expected to increase by
Looking beyond Asia and Latin America to elsewhere in the non-OECD, oil demand in
the Middle East is projected to increase by 0.3 mb/d in 2013. This has been supported
by remarkable growth in Saudi Arabian oil demand of 7% in 1Q13, driven by increasing
requirements for industrial and transportation fuels.
Overall, current estimates call for global oil demand to increase by 0.8 mb/d this year,
slightly higher than the growth seen in 2012. A large portion of the growth is seen
coming from China, with a 0.4 mb/d increase. The other non-OECD countries are
expected to add some 0.8 mb/d, with the Middle East region accounting for around
0.3 mb/d, followed by Other Asia and Latin America with growth of about 0.2 mb/d each.
In contrast, OECD demand is expected to see a contraction of around 0.4 mb/d, which
is slightly less than in 2012.
Most recent available monthly US oil demand data for February 2013 indicates a slight
decline in oil demand of 0.4%, or 90,000 b/d compared with the same month in the
previous year. Increasing industrial production was the main factor behind a solid
increase in propane/propylene requirement, while a decrease in driving primarily
stemmed from higher fuel prices.
There was a sharp drop in gasoline demand compared to the previous month and the
same month a year earlier. Cold weather also reduced driving miles, which negatively
impacted growth in gasoline demand. Moreover, residual fuel oil requirements
continued their downward trend for another month, showing a strong decrease of
almost 23% y-o-y. The last month which recorded growth in residual fuel oil demand
was August 2012. Preliminary weekly figures for March and April 2013 show that the
picture remains unchanged compared to February 2013, with industrial fuels — mainly
propane/propylene — on the rise, while transportation fuels are declining. Both months
show slight y-o-y declines in the range of 0.2% to 0.4%.
The outlook in US oil consumption for 2013 is strongly dependent on the
development and recovery pace of the US economy. Unemployment rates and fears of
future rising inflation are some of the factors which could influence oil demand in the
country. Nevertheless, the US Federal Reserve has already announced that it will
continue efforts to keep interest rates low in order to support economic growth.
Therefore, the outlook for US oil demand in 2013 remains unchanged from the situation
one month ago. However, as the outlook of the US fiscal policy becomes clearer, oil
demand could experience revisions in either direction.
In the latest report from March 2013, Mexico’s oil demand declined for the first time
since September 2012 y-o-y by almost 0.12 mb/d. Both industrial and transportation
fuels declined as Mexican factory activity saw its slowest rate since January 2013,
driven by lower exports to the US, which is suffering from weak demand. Since
manufacturing exports account for around one fourth of the country’s GDP, further
developments in the Mexican economy and oil requirements are closely related with
developments in the US economy in 2013.
Cold weather and increasing industrial activity pushed up Canada’s oil demand in
February 2013 following a strong January. Oil usage in industrial fuels, and especially
fuel oil, dominated these increases. Projections for Canadian oil demand in 2013
remain unchanged from those of the previous month, with expected oil requirements in
2013 remaining at the same level as in 2012. The country’s strong economic
dependence on the US is — as is the case of Mexico — a leading influence.
While OECD Americas oil demand shrank by 0.27 mb/d last year, oil demand this year
is expected to remain at roughly the same level.
European oil demand contracted in year-on-year terms for another month in March
2013. Oil demand was on the decline not only in countries facing sovereign debt
concerns, such as Spain, Italy, Portugal and Greece, but also in the UK and France.
However, a cold March in 2013 did manage to limit these declines.
Oil demand in Europe’s Big Four economies was characterised by a strong
contraction in industrial and transportation fuels, indicating that the region is moving
steadily towards a deep economic recession. Additionally, the European auto industry
saw another month of declining car sales in March of around 10% y-o-y, and
projections show 2013 car sales declining 7% over 2012. Car sales are moving towards
their lowest level in the last 20 years. In Germany and France, March 2013 car sales
slumped by 17% and 16%, respectively. The UK was the only country which saw car
sales increase in March 2013, with a rise of nearly 5%. The latest information shows
German business sentiment falling in April 2013 for the second consecutive month, as
a result of declining exports to Euro-zone and Chinese markets.
General expectations for the region’s oil consumption during 2013 have once more
worsened since last month’s projections, mainly due to recent downward revisions to
GDP in 2013. The only factor which might somewhat offset the expected declines in oil
demand in 2013 would be the very low historical baseline.
European oil consumption in 2012 shrank by 0.52 mb/d as a result of the economic
crisis in several regional economies. In 2013, oil consumption is projected to again
decrease, but by a lower 0.32 mb/d, although risks remain skewed towards the
OECD Asia Pacific
In Japan, March 2013 oil demand fell by 7.4% y-o-y as a result of milder weather
leading to lower requirements for kerosene. A decline in petroleum product use in the
power sector also affected Japanese demand in March. As was the case in the first two
months of the year, March saw a decline of approximately 0.2 mb/d in direct burning of
crude and fuel oil for electricity generation.
In contrast, demand in certain product categories improved compared with the previous
month, most notably naphtha requirements for the petrochemical industry and jet fuel.
Improving industrial activity implied increasing distillate demand in March relative to the
previous year, while the same time frame saw decreasing new car sales, causing a
substantial fall in gasoline requirements. The latest data, however, indicate an increase
of almost 2% in car sales during April 2013; the first monthly increase since August
The wild card for the 2013 Japanese oil demand outlook is whether or not some
nuclear power plants will restart later in the year. Currently, only two of Japan's 50
nuclear reactors — Kansai Electric's Ohi No. 3 and No. 4 units in Fukui prefecture — are
operating, but they are expected to interrupt their operation for maintenance in
September 2013. In addition, the finalisation of new safety regulations from the
Japanese Nuclear Regulation Authority (NRA) will not take place before mid-July. All
nuclear power utilities will be required to comply with these safety regulations prior to
resuming operations. Japanese government officials have recently stated that there is a
possibility that operations will resume at some of the country’s nuclear reactors later this
year, possibly by the end of 3Q13, at the earliest.
As far as the outlook for 2013 is concerned, current indications remain unchanged from
last month’s forecasts and imply that Japanese oil demand will fall by around 0.1 mb/d
compared to 2012, with risks continuing to be on the downside.
In South Korea, oil consumption in February 2013 fell by 0.08 mb/d, y-o-y. The increase
in naphtha for the petrochemical industry was more than offset by shrinking
requirements in all other main product categories, notably LPG, residual fuel oil,
distillates and gasoline. Current projections for South Korean oil consumption during
2013 remain unchanged compared with last month’s forecasts, i.e. with oil consumption
expected to remain flat compared with 2012.
OECD Asia Pacific oil consumption grew in 2012 by 0.35 mb/d, resulting mainly from
Japanese direct crude/fuel oil burning for electricity generation. OECD Asia Pacific oil
consumption is projected to fall slightly by 0.09 mb/d in 2013, due to the fading out of
baseline effects and to the possibility of more frequent substitution of fuel with natural
In March 2013, India’s oil demand returned back to normal growth at 2.1% y-o-y. All
product requirements grew y-o-y, with the exception of jet fuel/kerosene and fuel oil,
which fell 3% and 4%, respectively. Growth in naphtha sales was solid for another
month as a result of increasing activity in the country’s petrochemical sector.
As new auto sales continued to decline in March 2013, gasoline requirements grew
marginally, despite reductions in fuel prices. During the fiscal year, which ended in
March 2013, Indian car sales declined for the first time in the last 10 years as a result of
the country’s economic slowdown. LPG requirements did not grow for the fifth
consecutive month due to increasing LPG retail prices and caps on LPG cylinders.
The overall forecast for 2013 Indian oil consumption remained unchanged compared
with last month’s projections, with the country’s fiscal deficit continuing to impose some
In Indonesia, increasing transportation and industrial fuel requirements — notably
gasoline — resulted in an overall increase of 1.2% in oil requirements during February
2013 y-o-y. The Indonesian government announced on 30 April 2013 its decision to
raise subsidised fuel prices in an effort to reduce state costs, leaving the time and exact
value open. Indonesia subsidises 88 RON gasoline, gasoil and kerosene, but not 92
RON and 95 RON gasoline. The subsidised prices for 88 RON gasoline and gasoil are
4,500 rupiah per liter, compared with the market price of 10,000 rupiah per liter. A future
possible reduction in subsidies would definitely impose a strong downside risk to the
country’s oil demand, of which transportation fuels comprise around 40%.
In Thailand, February 2013 oil requirements grew strongly for one more month, by 7%,
with the bulk of these volumes coming from distillates, LPG, gasoline and naphtha y-o-y,
mostly driven by industrial and petrochemical activities. Thailand’s oil demand is also, as
is the case for Indonesia, influenced by existing LPG subsidies. Thailand’s National
Energy Policy Council (NEPC) plans to meet in the near future and decide on a
reduction for at least part of the LPG subsidies. The plan was first announced last
December by the Ministry of Energy’s Energy Policy and Planning Office (EPPO); it
proposed gradual price rises for the three consumers sectors — residential, industry and
transportation. It has, however, been postponed several times due to a survey of a
proposed subsidy scheme for street vendors and low-income earners. Thailand’s LPG
demand is approximately 0.25 mb/d; residential, transport, industry and petrochemical
sectors account for approximately 40%, 12%, 13%, and 35% of this figure, respectively.
The process of phasing out 91 RON gasoline in Thailand, which began in January 2013,
led to approximately twice as much ethanol demand as vehicles switched to gasohol, a
blend available in 10%, 20% and 85% ethanol concentrations.
Overall, Other Asia’s oil demand saw strong growth of 0.31 mb/d y-o-y in 2012, partly as
a result of excessive Indian diesel demand for the power generation sector. In 2013, oil
demand is expected to see continued solid growth of 0.23 mb/d.
February 2013 was another month showing strong growth in Brazil, with oil demand
increasing by 0.1 mb/d compared with February 2012. As was the case in January
2013, industrial fuels — notably residual fuel oil — were the main contributors to this
growth which stemmed from strong industrial production, especially manufacturing
In Argentina, oil demand in February 2013 grew only marginally by 0.4% y-o-y;
increasing requirements for gasoline and LPG have been mostly offset by decreasing
distillates demand. Latest preliminary Ecuadorian data for March 2013 showed a slight
decrease in oil requirements y-o-y — gasoline requirements rose marginally, while fuel
oil demand shrank slightly.
Latin American oil consumption in 2012 grew by 0.20 mb/d. In 2013, Latin American oil
consumption is projected to increase by around 0.23 mb/d.
In Saudi Arabia, 1Q13 oil demand grew remarkably at 7% y-o-y as a result of
increasing requirements for industrial and transportation fuels, while relatively mild
weather implied less direct crude burning. In addition to road transport, which is
anticipated to continue to increase in the coming months, the petrochemical sector is
also expected to add a significant amount to oil demand growth as a result of new
ethylene capacity additions.
Oil consumption in Kuwait also grew strongly during 1Q13, by 4% y-o-y, with distillates
accounting for the bulk of the increase. Similarly strong oil demand in 1Q13 has been
observed in Iraq (10%) and Qatar (18%), y-o-y. Growth in Middle East oil use during
1Q13 was mainly led by industrial and transportation fuels, as a result of a strongly
growing economy and industrial production.
The outlook for Middle East oil demand in 2013 has been revised upward since last
month’s projections, reflecting the upward revsision in GDP gorwth, and the risk
remained skewed to the upside.
Middle East oil consumption grew by 0.25 mb/d in 2012; oil consumption in 2013 is
projected to increase by a higher 0.30 mb/d.
The growth in China’s oil demand in March fell by just 2% y-o-y, the lowest percentage
seen since August 2012. This was a result of a slowdown in economic growth, mainly
affecting industrial fuel demand. For all of 1Q13, China’s oil demand grew by only 0.3 mb/d
or 3.5%, compared with 0.6 mb/d or 5.0% in 4Q12. This likely reflects some weakness in
Chinese economic activity as Chinese GDP data for 1Q13 came in below consensus.
Nevertheless, March demand for transportation fuels, especially gasoline, grew as a
result of lower fuel prices and rising auto sales, up 13% in March 2013, y-o-y. Moreover,
jet fuel demand rose for another month due to healthy growth in the country’s aviation
sector. The latter was supported by reductions in domestic jet fuel prices by the National
Development and Reform Commission (NDRC). Most recently, the NDRC also
announced cuts in gasoline and diesel retail prices by 395 and 400 yuan/mt respectively,
effective 25 April 2013. These are the first adjustments since the introduction of a new
pricing mechanism last month and account for a 4.6% and 5.2% reduction in the prices of
the two products. Finally, the NDRC announced that it posts regular updates every 10
working days on product price adjustments in an effort to increase transparency.
Chinese oil demand is expected to pick up in 2Q13 due to increasing oil usage in the
agricultural sector. However, any rise is likely to be limited given the slower economic
momentum. Chinese oil consumption grew by 0.33 mb/d in 2012, while oil consumption
in 2013 is projected to increase by 0.35 mb/d, unchanged from last month’s projections.