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Asian Developing Countries Oil Demand in September 2013

Source: OPEC 9/24/2013, Location: Asia

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.

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