World oil demand
The shift in momentum from developing countries to OECD regions that has been
seen in the most recent macroeconomic data, permitted a slight upward revision in
total world oil demand growth for 2013 from last month’s MOMR report. World oil
demand growth in 2013 was revised up by 25 tb/d to stand at 0.82 mb/d.
The bulk of the positive revision came from the OECD regions as a result of better-thanexpected
market sentiment. Oil demand in the OECD regions was revised up by a total of
40 tb/d, gains were particularly notable in OECD America (10 tb/d) and OECD Europe
(30 tb/d), while OECD Asia Pacific remained unchanged.
On a quarterly basis, the second quarter was revised higher by 70 tb/d with the majority of
the adjustment coming from OECD Europe. The third and fourth quarters were also
revised higher — by 50 tb/d each — in anticipation of a general improvement in key OECD
economies. Conversely, figures were revised down for some developing countries. “Other
Asia”, especially India, had an adverse impact on demand growth figures. The region was
revised down in both 3Q13 and 4Q13 by 30 tb/d each quarter, leading to a total reduction
in demand of 20 tb/d for the whole of 2013. Lacklustre economic indicators, as well as the
impact of falling subsidies in various countries in the region, prompted these downward
In absolute terms, total world demand in 2013 is expected to reach 89.74 mb/d. The OECD
region is expected to reach 45.71 mb/d, up slightly from last month’s figure of 45.67 mb/d.
In contrast, total demand figures for developing countries were adjusted lower to reach
28.83 mb/d, slightly down from the 28.85 mb/d reported last month.
Demand growth data for 2014 remained unchanged at around 1.04 mb/d, despite regional
adjustments made to account for the latest data. In absolute figures, total oil demand in
2014 is now expected to average around 90.77 mb/d.
In OECD Americas, expectations for US oil demand in the first half of 2013 have not
changed since last month. These include growing demand for distillate fuel,
propane/propylene and naphtha for petrochemical feedstock and declining
requirements for residual fuel oil, gasoline and jet fuel/kerosene. The picture matches
recent economic data, which shows rising industrial production, strengthening
consumer confidence, increasing construction activity, and a recovery in the auto
The overall outlook for oil demand in OECD Europe for 2013 has improved since last
month’s projections, particularly for some main countries in the region. Oil demand
grew in Germany and the UK in July, while falling slightly in France. Italy continued to
be on the negative side, with demand improving compared to the previous months.
Similarly, oil demand in countries such as Greece and Portugal witnessed less of a
contraction than in recent months.
For the Other Asian region, Indian data continues to paint a grim picture with
lacklustre economic data, heavy rainy season across the country, lower sales figures
of vehicles, improved power situation in the country which reduced gasoil/diesel oil
consumption for power generation and the higher base line for 2012, curbing oil
demand growth figures for the recent months and possibly in the near future.
Reduction in subsides from other countries in the region are also expected to weigh on
oil consumption in the region.
The latest US monthly data for June shows a decline in oil demand of around
0.17 mb/d y-o-y. This downward trend supports a weakening also observed in May. All
main products dropped, with the bulk of losses seen in jet fuel/kerosene. Gasoline and
residual fuel oil consumption also fell, while demand for naphtha for the petrochemical
industry, as well as other industrial fuels, notably pentane plus, increased. In general,
there has not been much change in estimates for US oil demand since last month —
growing demand for distillate fuel, propane/propylene and naphtha for petrochemical
feedstock and declining demand for residual fuel oil, gasoline and jet-fuel/kerosene
remain the main trends. Preliminary weekly data for July shows a strong increase of
around 5% y-o-y, with all main product categories registering gains, except residual
fuel oil. This increase in demand reflects recent economic data showing rising
industrial production, improving consumer confidence, increasing construction activity,
and a recovery in the auto market.
Meanwhile, preliminary weekly data for August shows flat oil requirements y-o-y, a
result of increasing demand for industrial fuels, especially propane/propylene, and
aviation fuels. Preliminary figures for July and August — together with a markedly
improving economy — provide grounds for cautious optimism for the remainder of
2013 and 2014. At the same time, potential downside risks, such as pending fiscal
issues and the effects of budget cuts on the overall economy, remain.
Thus, 2014 oil demand projections for the US remained slightly higher than in 2013,
and roughly unchanged from last month, with risk to some degree skewed towards the
In Mexico, a marginal decline in industrial production in July led to decreased oil
demand, with fuel oil and distillates accounting for the bulk of these declines. Mexican
oil demand forecasts for 2013 and 2014 are unchanged from last month showing
growth of only 0.5% annually. As Mexican industry is closely connected to
developments in the US market, future risks are skewed more towards the upside. In
Canada, June came in solidly with gains in all product categories, particularly
transportation fuels, in line with improvements in the automotive market. Canadian oil
demand for 2013 and 2014 is projected to remain roughly at 2012 levels, experiencing
only marginal increases, with risks being equally distributed between the upside and
downside, depending on how the economy develops.
In 2013, OECD Americas oil demand is expected to grow by 0.1 mb/d compared with
the previous year. In 2014, OECD Americas oil demand is projected to also increase
by 0.1 mb/d over the previous year.
OECD — Europe
July was a month in which positive signs pointing to further growth in European oil
demand dominated over negative developments. The absolute level of contraction in
European oil demand declined substantially starting in 2Q13, and continuing in the first
month of 3Q13. July oil demand grew in big consumers Germany and the UK, while it
fell slightly in France. Italy continued to be in the minus; however, by a smaller
magnitude than in recent months. Similar developments in Italian oil demand have also
been observed in Greece and Portugal, where oil demand contracted less than in the
early months of 2013. Positive oil demand developments are in line with increasing
July manufacturing PMI in the Euro-zone, which exceeded the 50 threshold for the first
time since July 2011.
Furthermore, the European auto market showed considerable improvements in July,
with increasing car sales across all major markets, such as Germany, France, the UK
and notably Spain, while the Italian market contracted slightly y-o-y. General
expectations for the region’s oil demand during 2013 have once more improved since
last month’s projections, supported by improvement in oil demand from some of the
main countries in the region. This is also in line with projections for 2014 — unchanged
since last month — which predict a smaller contraction for oil requirements than in
For 2013, European oil demand growth is projected to decrease by 0.31 mb/d, an
improvement over the decline of 0.54 mb/d in 2012, while oil demand growth in 2014 is
projected to contract by 0.17 mb/d, less than the decline expected in 2013..
OECD — Asia Pacific
A generally improving Japanese economy and rising petrochemical activity were the
main reasons behind relatively strong Japanese oil demand in July, in which increases
of around 0.05 mb/d y-o-y were seen. Naphtha and LPG — the backbones of the
petrochemical industry — grew significantly, while jet fuel demand increased 0.04 mb/d
y-o-y as a result of increasing aviation activities. Oil requirements for crude and fuel oil
for direct burning and electricity generation saw mixed trends, with fuel oil decreasing
and crude oil increasing, y-o-y. Gasoil demand was also strong as a result of
reconstruction activities related to the triple disaster of March 2011 and greater diesel
demand for transportation, especially trucks.
Restart activity for Japanese nuclear power plants did not change significantly, with the
exception of recent problems at the Fukushima plant. Currently only two out of a total of
50 plants are operating, while required inspection is not expected to take place within
2013. Around 12 utilities have applied to the Japanese Nuclear Regulatory Authority
(NRA) to restart operations, but the latest projections do not envision the first nuclear
reactor restarting prior to July 2014. Nevertheless, direct burning of crude and fuel oil
for electricity generation is expected to continue falling as a result of increasing fuel
substitution with LNG and coal.
The outlook for Japanese oil demand in 2013 remains unchanged from last month’s
forecasts, with risks remaining skewed towards the downside as a result of signs of
continued fuel substitution for electricity generation. Similarly, oil demand projections for
2014 remain unchanged from last month and assume a real probability that only a small
number of nuclear plants will re-join operation next year.
In South Korea, June showed a reduction of 0.07 mb/d, y-o-y. Increasing industrial
production and hence stronger demand for distillates has been more than offset by
declining LPG and residual fuel oil requirements, with increasing LNG usage in the
power generation sector. The forecast for South Korean oil demand during 2013 and
2014 remained unchanged from last month’s projections.
OECD Asia Pacific oil consumption fell by 0.10 mb/d in 2013, a trend expected to
continue in 2014 at an even greater extent with a drop of 0.13 mb/d, y-o-y.
India’s oil consumption has been on the negative side of the chart for the second
month running, recording a y-o-y decline of 68 tb/d in July after marginally declining in
the previous month. The last time a decline in oil consumption took place over
consecutive months was between August and October of 2010.
In absolute terms, total oil consumption in India in July stands at 3.52 mb/d, its lowest
level since October of last year. In terms of products, gasoil/diesel oil, which account for
the largest portion of Indian oil demand, have seen a declining trend for the past three
consecutive months, edging lower in May before dipping further during the months of
June and July by 27 tb/d and 100 tb/d, respectively. This is a trend which has never
before been witnessed in data available for Indian gasoil demand growth figures, going
back at least a decade. Gasoil/diesel oil account for around 40% of total Indian oil
consumption. Other products showed a mixed performance, with LPG and gasoline
demand improving, while jet fuel, kerosene and fuel oil demand are declining, with fuel
oil being firmly in the negative.
As stated in last month’s MOMR, the rainy season across the country dampened
gasoil/diesel oil consumption. This was compounded by a 15% decline in sales figures
for diesel vehicles. A number of factors were behind the sharp decline in gasoil
consumption in July, namely the shift away from gasoil/diesel oil to other fuel types, particularly by construction companies due to economic viability; the slowdown in
economic activity accompanied with a historically sharp depreciation of the rupee
against the dollar; the country’s improved power situation which reduced gasoil/diesel
oil consumption for power generation, and the higher baseline for 2012.
Furthermore, the country’s manufacturing PMI a dipped in July after staging a modest
improvement in June over the previous month. The July index reading was above the
expansionary level at 50.11, although the overall trend is lower. August PMI fell even
further, slipping into contraction territory. Additionally, industrial activities in the country
have been weakening since February of this year, as India’s sluggish economic
conditions pushed manufacturing output lower.
Taiwan’s oil consumption improved in June, with product demand registering an
increase of 78 tb/d from levels seen in June 2012, a jump of nearly 10%. This
improvement in oil consumption can be primarily attributed to a lower growth base in
2012, rather than a direct improvement in Taiwan’s consumption. Total demand for the
country stood at 0.89 mb/d, compared with 0.81 mb/d for the same period in 2012. It is
worth pointing out that exports — the backbone of Taiwan's economy — have been
fluctuating in the first half of 2013, with manufacturing PMI dropping for four
consecutive months from as high as 62.4 in March to 52.6 in both July and August.
With signs of improvement in the OECD economies, potential improvement in new
orders for Taiwanese exports are anticipated.
In Indonesia, despite a slight improvement in total consumption growth levels for the
month of June — by 10 tb/d or just shy of 1% growth on a y-o-y basis — gasoil/diesel
oil consumption in the country continued to decline as a result of subsidy reductions in
late June. Product demand was lower than last year’s levels by 28 tb/d, or just below
6%, in June.
As a result of the latest developments in the Other Asia region, oil consumption in the
third and fourth quarters were adjusted lower by 30 tb/d each, mainly due to weaker
Indian demand, as well as the impact of subsidy cuts.
Other Asia’s oil demand is expected to grow at a rate of 0.21 mb/d in 2013, following a
downward revision of 16 tb/d since last month. This is also lower than the growth levels
seen in the previous year, largely a result of slower economic activities in India and
subsidy reductions in Indonesia. Other Asia’s oil demand growth is now projected to be
marginally higher in 2014, reaching 0.24 mb/d.
Total oil consumption in Latin America is estimated to reach 6.49 mb/d in 2013,
growing by around 0.23 mb/d from 2012 levels. These estimations are unchanged from
last month’s figures despite slow overall economic sentiment in Brazil, the largest
consuming country in the region. The Brazilian economy has been decelerating since
the start of this year in spite of a better-than-expected uptick in 2Q GDP growth figures,
which expanded by 3.3% y-o-y. Although manufacturing PMI for the country improved
marginally, it nevertheless remained in contraction territory for the fourth consecutive
month in August at 49.4, although up from 47.66 in July.
Overall, oil consumption in the country remained positive, particularly on a cumulative
basis. Data for the first half of the year illustrates good demand growth, with a total oil consumption of 0.14 mb/d, representing nearly a 7% rise in demand over the same
period last year. June recorded demand growth of 83 tb/d, an increase from June 2012
of almost 4%. Figures for gas oil/diesel oil also remained intact on both a cumulative
and monthly basis, supported by on-going construction activities for the upcoming
World Cup in 2014 and Olympics in 2016.
Gasoline consumption in Argentina — the third largest oil consumer in the region, with
an expected total consumption of 0.82 mb/d in 2013 — registered a decent rise over
last year’s figures. June data showed growth of around 10 tb/d, which equates to a rise
of nearly 8% y-o-y. In June, passenger car sales in the country managed a rise of
almost 6% from last year’s levels, with light passenger cars registering positive
performance at around 70,000 auto purchases. Total car sales figures from January to
June stood at around 470,000 cars, almost 8% higher than in the same period last year.
Moreover, Argentina's economy improved slightly in the first quarter, mainly as a result
of healthier domestic consumption. With expectations of growth remaining slow in
upcoming quarters, the country’s GDP is anticipated to expand by around 2.6% in
In 2013, Latin American oil demand increased by 0.23 mb/d and 2014 projections are
expected to see almost similar growth.
In the Middle East, oil consumption is expected to continue growing at a steady rate,
increasing by 0.29 mb/d from 2012 levels. Most of this growth is likely to come from
Saudi Arabia, which, with forecast growth of 0.15 mb/d, represents more than half of
expected growth in the region. The country’s growth rate for the month of July was
around 6% compared with the same period last year. The 140 tb/d increase in July has
mainly been attributed to fuel oil consumption in the country, which was considerably
higher on a y-o-y basis, possibly as a result of using fuel oil for power generation plants.
Demand on power generation plants usually witnesses a surge during the summer
months, particularly as air conditioning usage intensifies. July of this year coincided with
the holy month of Ramadan, which places additional demands on transportation and
power sector fuels.
Thus, gasoline also posted a positive gain, accelerating by around 5% from June 2012
levels, though eventful 2013 summer activities were not solely responsible; overall car
passenger sales have also been on the rise. The passenger vehicle market grew over
14% from the previous year in the first half of 2013, with total car sales of around
400,000 units boosting gasoline consumption in the country, which grew by more than
7% from January to July of this year.
In 2013, Middle Eastern oil demand is expected to grow by 0.29 mb/d. Oil demand
growth in the region for 2014 is projected to be in the 0.31 mb/d range.
Chinese annual oil demand growth has been increasing over the past two months
compared to earlier this year to reach just below the average five-year growth levels of
around 0.48 mb/d. Demand growth for the country during the months of June and July
was at 0.45 mb/d and 0.47 mb/d respectively, according to the latest data. In absolute
figures, total oil demand for the country stands at 9.79 mb/d for the month of July, a 5%
increase from a year earlier, marking the highest growth rate since February.
Additionally, products have been on the rise on a y-o-y basis, with all products recording
positive growth, while gasoline and gasoil/diesel grew the most, at 0.13 mb/d and
0.12 mb/d, respectively. However, gasoline growth was relatively modest for the month
of July, compared with monthly growth figures for the past 18 months, with the exception
of March 2012 and April 2013. In percentage terms, growth in gasoline demand has
continued to outpace that for gasoil, although to a lesser degree in July. This
phenomenon has been observed in Chinese oil demand growth figures for the past
Gasoline demand growth in China has been outpacing gasoil as a result of the former
capturing larger market segments due to the rising number of new purchases of
vehicles, which typically run on gasoline. Gasoil/diesel-fueled vehicles are rather
uncommon in China, as the government discouraged use of this fuel for private vehicles.
July private vehicles sales improved by around 10% on a y-o-y basis, with total sales of
1.24 million vehicles supporting the increase in gasoline demand in the country.
In absolute terms, gasoline demand has steadily grown from 1.96 mb/d in January 2012
to 2.14 mb/d in July 2013, with an average monthly growth level of 12%. While total
monthly gasoil demand lacked direction, it held at similar levels seen in the same period
of comparison, fluctuating between a high of 3.64 mb/d and a low of 3.29 mb/d, with
growth very much depending on the country’s industrial output and export levels.
In percentage terms, and on a monthly average basis, the product experienced only
minor monthly growth of 1% compared with a year ago. Slowing industrial activities in
the country have also contributed to lower gasoil/diesel growth in the past months,
despite the latest news from China's manufacturing sector, which grew in August for the
first time in four months, according to PMI data, rising to 50.1 from 47.7 the month
Chinese oil demand is expected to grow by 0.33 mb/d in 2013 and to see similar growth