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World Oil Demand - Mar 14

Source: OPEC_RP140306 3/12/2014, Location: Europe

World oil demand growth was revised upward by 70 tb/d to stand at 1.05 mb/d over the previous year, following an improvement in OECD Americas oil consumption as well as an upward adjustment in Africa. For 2014, growth is expected to be around 1.14 mb/d, representing an upward adjustment of 50 tb/d from last month’s figures, to reach 91.1 mb/d.

On a regional basis, the most recent data for 2013 continues to indicate strongerthan- expected growth in OECD Americas and, to a lesser extent, in OECD Europe. Africa was also adjusted higher, mainly as result of the low base line.

In OECD Americas, US oil demand from the month of December 2013 showed a significant increase in consumption y-o-y. All main products rose with the bulk of increases seen in distillate/residual fuel oil and propane/propylene. Growing distillate fuel demand was the main oil demand consumption driver in the US, supported by improving industrial production. An improvement in gasoline demand was due to increasing mileage. Furthermore, general improvements in the manufacturing activities of the country in the 4Q13 supported the overall oil demand figures during the same period.

In OECD Europe, oil consumption for 2013 was in a negative mode for the whole of OECD Europe. Most of the contraction was in the first part of the year before subsequent improvements in the second half. The year concluded with around 0.18 mb/d less consumption than the year before. Stabilization signs were mainly due to increasing industrial production and rising car sales, especially during the 4Q13.

In OECD Asia, decreases in Japanese oil demand consumption were once more a result of direct fuel and crude burning for electricity generation coming out of a high base in 2013. However, decreases were offset by rising LPG and naphtha demand mainly due to higher petrochemical production. Jet fuel also grew significantly during the month largely attributed to the improved aviation sector. Fuel oil usage fell as major utility companies in Japan consumed much less than the level seen in January 2013.

In Other Asia, India’s oil demand fell marginally in January 2014 following slight increases in December 2013. Gasoline demand growth in January 2014 was weaker compared with the months before, due to continuing winter conditions in parts of the country, declining trends in the automobile sector and a relatively high baseline from last year. However, improvements in the construction, petrochemical and residential sectors supported demand for bitumen and LPG.

In Latin America, the year 2013 ended with an increase in oil requirements in Brazil, largely attributed to gains in gasoline and alcohol in the transportation sector, as well as diesel oil and fuel oil in the industrial sector, particularly in construction activities. In China, oil demand continued its increasing trend with growth in January 2014, mostly as a result of rising gasoline, LPG, jet fuel and naphtha requirements. Gasoline demand moved in line with rising car sales and accounts for the largest growth share. Increased LPG and naphtha consumption, on the other hand, can be attributed to the country’s expanding petrochemical industry, a trend which is projected to continue in the future.

OECD Americas
The latest US monthly data for December 2013 shows a substantial increase in oil demand growth y-o-y, with data almost matching the exceptional growth of around 1.0 mb/d seen back in September 2013. All main products rose with the bulk of the increases seen in distillate/residual fuel oil and propane/propylene. The main drivers of oil demand in the US during the last three months of 2013 were growing distillate fuel requirements, as a result of improving industrial production and an improvement in gasoline demand due to increasing mileage. Additionally, a general improvement in the manufacturing activities of the country justified overall developments in oil consumption during the 4Q13 with the Purchasing Managers’ Index (PMI) averaging around 56 for the whole quarter.

Preliminary weekly data for January and February 2014 show rather mixed signals, while January 2014 oil demand growth remained healthy, propelled by a continuation of improvements in industrial activities as well as the cold weather snap in the northern part of the country. Oil requirements slipped into decline in February 2014 according to preliminary weekly figures.

For 2014, oil demand growth in the US is very much linked to the country’s’ economic activities and continues to be dependent on the development and pace of recovery of the US economy. It has marginally pointed to the upside as a result of the latest positive developments during the second half of 2013.

Driven mainly by economic growth, 2014 US oil demand is projected to grow by approximately 0.15 mb/d over 2013 total oil consumption. Similar to 2013, US oil demand consumption in 2014 is mainly dependent on fossil fuel prices, as well as the level of substitution between natural gas and fossil fuels, the severity of the winter season and the overall pace of recovery in the US economy.

The weakening Mexican oil consumption trend seen in 2013 continued into 2014 with January oil consumption data being sharply in the negative. Oil consumption fell by almost 0.14 mb/d, or 8%, compared with the same period last year. All products registered drops at different magnitude with the exception of jet fuel and other products which were slightly on the positive. Similar to last month, fuel oil registered the most declines amongst the product pool, falling by more than 61% as industrial activity and the agricultural sector continued their poor performance from the end of last year.

Mexican oil demand slipped by around 29 tb/d in 2013, while the picture is expected to improve slightly in 2014 to reach minus 11 tb/d y-o-y.

In Canada, December 2013 total oil consumption fell by approximately 0.15 mb/d, or more than 7%, pushing down the country’s total oil consumption to approximately 1.9 mb/d compared with an average daily oil consumption of 2.1 mb in 2013. All main product categories witnessed declines with LPG and other products falling the most. In contrast to last month, the fuel oil performance was improved, leaving products with an increase compared with last year. This was mainly due to less switching from/to fuel oil. In 2013, OECD Americas oil demand rose by 0.32 mb/d, and oil demand during 2014 will grow by 0.19 mb/d compared with 2013.

OECD Europe
The latest available data for the European Big 4 oil consuming countries in January 2014 displays a falling trend y-o-y. Losses in requirements for fuel oil and other products have been only partly offset by gains in demand for jet fuel/kerosene, particularly in the UK. In general, the year 2013 closed with a contraction by around 0.18 mb/d for the whole region, with the bulk of losses being located in the first quarter of the year and with some signals for improvement thereafter. Nevertheless, caution is required for projections, as 2013 still includes low baseline effects from previous years.

Nevertheless, stabilizing oil demand contraction figures are in line with leading indicators, such as increasing industrial production and rising car sales, especially during the 4Q13. In fact, passenger car sales grew in January 2014 for the biggest part of the region and for the fifth consecutive month in a row. The expectations for 2014 oil demand in the region remained unchanged since last month, with risks more to the upside, as debt issues seem to be under control for most countries. However, there are also some significant downside risks that are directly related to the further development of the economy during 2014.

In 2013, OECD Europe oil demand shrank by 0.18 mb/d, while oil demand during 2014 will decrease again by 0.16 mb/d compared with 2013.

OECD Asia Pacific
In Japan, January 2014 y-o-y oil demand decreases were once more mostly originated in direct fuel and crude burning for electricity generation. Decreases were offset by rising LPG and naphtha demand, which grew by 3% and 8%, respectively, mainly due to higher petrochemical production. Jet fuel also grew significantly during the month as the product managed to increase by more than 28% y-o-y. This was largely attributed to the booming aviation sector. Kerosene, which is used as a heating fuel, dropped as the winter was milder than in the same month last year. Similarly, fuel oil consumption fell by more than 10% y-o-y as the ten major power utility companies consumed around 64 tb/d less than seen in January 2013. This led to an overall decrease of around 0.1 mb/d in the Japanese oil consumption for the month of January 2014 compared with the same period last year.

As far as the outlook for 2014, Japanese oil demand is concerned, current indications remain roughly unchanged from last month’s forecasts with the risks being skewed more towards the downside. Oil demand projections for 2014, based on the assumption that a few nuclear plants will re-join operation, show shrinkage in oil demand requirements by 0.16 mb/d.

In South Korea, there was an increase of a mere 39 tb/d, or more than 1%, December 2013 y-o-y, with the bulk of the increase in transportation fuels such as diesel and gasoline, as well as naphtha for the petrochemical industry. On the other hand, and similar to last month, residual fuel oil was lower by 12% mainly due to slower marine bunkering activities and less consumption for power generation. The expectations for 2014 oil consumption growth in South Korea are around 30 tb/d, slightly improved from the levels seen in 2013.

OECD Asia Pacific oil consumption declined by around 0.23 mb/d in 2013, resulting mainly from reduced Japanese direct crude/fuel oil burning for electricity generation. For 2014, OECD Asia Pacific oil consumption is projected to fall by 0.13 mb/d.

Other Asia
Indian oil demand fell again slightly – approximately 0.7% – in January 2014 y-o-y, following a slight increase in the previous month. Rising LPG, gasoline and bitumen requirements have been more than offset by declining demand for diesel oil and particularly fuel oil. Despite gains, gasoline demand growth in January 2014 was weaker compared with the months before due to continuing winter conditions in parts of the country, as well as declining trends in the automobile sector (with the exception of two-wheelers and the relatively high baseline from last year).

As far as the gains in LPG and bitumen demand are concerned, the reasons are the same as last month: construction activities are the main driver behind bitumen usage, while the petrochemical and residential sectors are the recipients of LPG usage. For another month more, residual fuel oil demand in the agricultural and power generation sectors has been strongly affected by substitution with natural gas. Moreover, jet fuel requirements have benefitted by increased passenger goods traffic in January 2014, with demand for jet fuel up by approximately 5% y-o-y. With the passing of 2013, the growth in Indian oil demand was rather disappointing, substantially influenced by the turbulence in the country’s fiscal system. The latter is the main downside risk factor for 2014 Indian oil demand, with the overall forecast remaining unchanged since a month earlier and the risks pointing more towards the downside, as a result of the country’s growth uncertainties.

In Indonesia, the latest available December 2013 data is led by rising demand for LPG and fuel oil – the first mostly used in the residential sector and the latter for industrial purposes – partly offset by falling demand for gas/diesel oil. 2014 Indonesian oil demand is closely related to the ongoing budget deficits, which implicitly may curb subsidies for petroleum products and hence oil demand.

Taiwan’s oil demand grew impressively for another month, almost 13% in December 2013 y-o-y, with the bulk of increases originating in naphtha usage. The risks for 2014 oil demand in Other Asia have not changed since last month and are skewed more to the downside, as a result of the concerns regarding the developments in the biggest oil consumer in the region, India, and the ongoing issues related to the economies in some of the other countries in the region.

Other Asia’s oil demand grew 0.20 mb/d y-o-y in 2013. As for 2014, oil demand in the region is forecasted to be 0.23 mb/d higher than 2013.

Latin America
In Brazil, December 2013 brought more demand for transportation fuels, gasoline and notably alcohol, the latter showing a remarkable 25% y-o-y increase. Meanwhile, residual fuel oil requirements fell, partly lowering total oil demand growth by 2.8% y-o-y.

The year 2013 ended with a 5% increase y-o-y in Brazilian oil requirements largely attributed to gains in gasoline and alcohol in the transportation sector as well as diesel oil and fuel oil in the industrial sector, particularly construction activities.

In Argentina, December 2013 was a continuation of a declining oil demand trend seen in during the previous months, particularly in declining distillates demand, which was in line with weakening industrial production during that month. The risks for 2014 oil demand in the region remain balanced with the upside risks relating to Brazilian oil demand and to that country’s construction activities for international events which will take place during 2014. Downside risks mostly concern further developments in the ongoing tumbling of the Argentine economy.

Latin American oil demand grew in 2013, by 0.22 mb/d. During 2014, Latin American oil demand is forecasted to increase slightly higher by 0.24 mb/d.

Middle East
In Saudi Arabia, oil demand in January 2014 was again strong, with increasing crude burning volumes intended for electricity generation slightly offset by modest declines in LPG, fuel oil and gasoline requirements.

Oil demand grew in Iraq during December 2013, with direct crude burning for electricity generation, jet/kerosene and gas/diesel oil taking the bulk of the gains that were partly offset by declining demand in gasoline and LPG.

Latest Qatari and Kuwaiti data for January show oil demand slightly increasing y-o-y. Kuwait fuel oil and Qatar LPG are the products accounting for the greatest part of these increases. The outlooks for 2014 Middle East oil demand remain stable since last month’s projections, with the risks being equally distributed both to the upside and the downside.

For 2013, Middle East oil demand grew by 0.28 mb/d, while it is projected to increase by 0.31 mb/d in 2014.

China
China’s oil demand continued its increasing trend with January 2014 growth of around 3% y-o-y. This was largely determined by rising gasoline, LPG, jet fuel and naphtha requirements. Gasoline demand moved in line with rising car sales during January and accounts for the largest share growth in the country. Gasoline demand growth could, however, be declining in the future as a result of restrictions on car sales imposed by a number of big Chinese cities and higher fuel quality standards, both measures part of efforts to reduce emissions. Both LPG and naphtha requirements can be attributed to the country’s expanding petrochemical industry, a trend which is projected to continue in the future as substantial increases in ethylene capacity are expected to go onstream during 2014.

Moreover, there are already significant substitutions of feedstock from naphtha towards cheaper LPG. These substitutions are expected to continue in the near future.

Moreover, the healthy aviation sector has called for more jet fuel demand, while gas diesel oil and fuel oil in the industrial sector are being increasingly substituted with natural gas and coal. The overall outlooks for 2014 remain relatively unchanged since last month with the same factors pointing to downside risks, such as a possible economic slowdown and implementation of measures in order to curb transportation fuels demand. In contrast, the flourishing petrochemical sector in the country and expansions in refining capacity could be considered as the principal factors that could push current 2014 oil demand projections up.

For 2013 Chinese oil demand grew 0.33 mb/d, while it is projected to increase again by 0.34 mb/d in 2014.

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