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World Oil Demand

Source: OPEC_RP150206 2/9/2015, Location: Europe

World oil demand growth for 2014 was kept broadly unchanged from last month’s MOMR at a level of 0.96 mb/d, with total oil demand anticipated to reach 91.15 mb/d. In 2015, world oil demand is projected to grow at a marginally higher 20 tb/d over last month’s report, supported by an upward revision of 15 tb/d recorded in OECD Americas. As a result, 2015 total oil demand growth currently stands at 1.17 mb/d with total oil consumption projected to reach 92.32 mb/d.

World oil demand in 2014 and 2015
OECD Americas
The most recent monthly US oil demand data covers November 2014 and implies y-o-y losses in oil requirements of around 1% after an increase in October 2014 and an overall flat 3Q14 in terms of growth. Preliminary weekly data for November led to optimistic expectations, which had to be revised downwards substantially once monthly data became available. Growth in November gasoline demand was slow, despite relatively low fuel prices, while distillate fuel demand fell slightly. Moreover, residual fuel oil and propane/propylene requirements remained on a downward trend for another month in 2014. Nevertheless, monthly data available for 11 months and preliminary weekly figures for December seem to show growing 2014 US oil requirements by 1%, y-o-y. Distillate fuel oil usage in the transportation and industrial sectors as well as gasoline demand accounted for the bulk of the increases, while residual fuel oil and propane/propylene demand were on the bearish side.

Preliminary weekly data implies a strong January 2015 with higher growth in gasoline, distillate and jet/fuel oil demand. The picture of US oil demand is generally in line with the economic improvements seen in the country, especially when considering the increase in oil requirements for the industrial and transportation sectors, as a result of lower fuel prices. While the development of 2015 US oil demand remains strongly dependent on the development of the US economy, it is skewed more to the upside as compared to last month, also as a result of more optimistic expectations in the road transportation sector.

In Mexico, oil demand increased in December 2014, particularly for gasoline, gas/diesel oil and jet fuel. However, for the whole of 2014, oil demand in Mexico declined, with all main product categories being in the minus, the largest drop seen in residual fuel oil, mainly as a result of substitution. The 2015 risks for Mexican oil demand are balanced compared with the previous month. The latest November 2014 Canadian data showed falling oil demand, notably in gasoline and gas/diesel oil requirements, yet partly offset by strong residual fuel oil requirements. 2015 projections for Canadian oil demand remain unchanged from those in the previous month.

In 2014, OECD Americas’ oil demand grew by 0.10 mb/d compared with a year earlier. 2015 OECD Americas’ oil demand is projected to increase by 0.20 mb/d over 2014.

OECD Europe
The decline in European oil demand seems to be endless, with September being the only month on the positive during 2014. November 2014 data implied oil demand in the region to be shrinking, notably in the European Big 4 consumers and in line with declining industrial production figures, compared with the same month a year earlier. Moreover, early indications for December 2014 show the European Big 4 oil demand to be only slightly declining y-o-y. With data available for eleven months of the year and preliminary figures for December, 2014 oil demand in the Big 4 shows losses of approximately 0.21 mb/d. The largest declines have been observed in gas/diesel oil, LPG, gasoline and fuel oil.

There was positive news for European auto sales, which continued their positive momentum in December 2014 with an overall 4.7% y-o-y increase for the sixteenth consecutive month and with positive momentum in almost all major markets, notably in Spain, the UK, Germany and Italy. It remains to be seen whether these positive indicators would be translated to higher oil demand in the future. Finally, some conservative expectations for an improvement in the 2015 European oil demand originate in the anticipated improvements in the overall economy along with the low oil demand baseline in the region. On the other side, heavy taxation on oil usage and pending economic challenges in several countries of the region pose some significant downside risks for future oil demand. The risk for the region’s oil demand during 2015 has remained balanced since last month’s projections.

In 2014, European oil demand shrank by 0.20 mb/d, while oil demand in 2015 is projected to decrease again, but to a lesser extent, by 0.10 mb/d.

OECD Asia-Pacific
Japanese oil demand decreased in December 2014 by 0.1 mb/d y-o-y, with increases in most product categories. Oil requirements in crude and fuel oil for direct burning and electricity generation fell as a result of increasing substitution with other commodities, while during the same month, demand for all other products rose, particularly jet fuel, LPG and naphtha. For the whole of 2014, Japanese oil demand fell by 5% y-o-y with jet fuel being the only product in the plus.

The outlook risks for 2015 Japanese oil demand remain unchanged from last month’s forecasts and will depend on the development of the country’s economy as well as the startup of operations of some of the country’s nuclear plants during 2015.

In South Korea, November 2014 demand came up declining, y-o-y. Growing demand for jet fuel and gas/diesel oil was outpaced by declining requirements for all other products. The outlook for South Korean oil consumption during 2015 remained unchanged as compared to last month’s projections.

2014 OECD Asia-Pacific oil consumption shrank by 0.18 mb/d. The downward trend will continue also in 2015 but to a smaller degree, dropping by 0.12 mb/d.

Other Asia
In India, demand for oil rose again in December to record the strongest month of y-o-y growth in 2014. Oil demand increased by 0.24 mb/d, well above 6% y-o-y, as compared to the same period a year earlier. Similar to last month, these developments were fueled by efforts to improve the country’s macroeconomic indicators and by lower oil prices despite increases in consumption taxes, which moderated the rise. Improved weather conditions also contributed to the strong increase. This growth was led by solid consumption for LPG, driving total demand growth data higher for yet another month. Consumption of LPG grew by almost 0.1 mb/d or just below 18% y-o-y due to an increase in LPG subsidies.

Similar to last month, gasoline also contributed to growth with a solid increase of more than 12% y-o-y, resulting in yearly growth of 36 tb/d compared with yearly growth of 32 tb/d in 2013. Car sales in December were also on the rise, increasing by more than 15% y-o-y, a continuation of the solid performance seen over the year. Diesel demand was also higher in December by 42 tb/d or just below the 3% compared with the same month the previous year, primarily supported by improved weather conditions and the macroeconomic status of the country.

For 2014, total oil demand in India has grown by around 90 tb/d or more than 2%, with LPG contributing most to this growth with 12%, followed by gasoline with 9% growth for 2014 compared with a year earlier. The solid performance was exhibited in 4Q, mainly as economic conditions of the country improved. This positive momentum is expected to continue into 2015.

According to data up to November 2014, oil consumption also grew in Indonesia Thailand, Singapore and the Philippines, while it declined sharply in Taiwan. Looking forward, the risks for 2015 in Other Asian oil demand growth are expected to be balanced with a slight positive effect from India as a result of the overall improvement in economic activities along with lower oil prices. Transportation fuels are expected to be the main contributors to growth. In other parts of the region, subsidies on transportation fuels and the degree of their reduction may influence oil demand growth, however the lower international prices at this stage should moderate the impact.

Other Asia’s oil demand is anticipated to grow by 0.22 mb/d in 2014. As for 2015, oil demand is forecast to be 0.25 mb/d higher than 2014.

Latin America
In Argentina, November 2014 was another month of positive oil demand growth with all products showing increases with the exception of fuel oil. Total product demand grew by around 10 tb/d, which amounted to more than 1% y-o-y. LPG and jet/kerosene were the largest contributors to oil demand growth, with LPG rising by almost 11% and jet/kerosene increasing by around 6%. With data up to November 2014, y-t-d data show a similar pattern of consumption in the country; while total consumption growth in the country was almost flat, LPG consumption grew the most, rising by more than 21% as compared to the same period in 2013. Jet/kerosene also rose by more than 6% y-o-y. Other products ? gasoline, diesel oil, fuel oil and “other products” ? were flat to declining.

Looking forward, the risks for 2015 are currently pointing more towards likely downward revisions as economic activity in Brazil is predicted to only slightly improve. On the other hand, the presence of lower oil prices in addition to any sudden changes in weather conditions should limit the impact.

Latin American oil demand is anticipated to grow by 0.20 mb/d in 2014. During 2015, oil demand growth is forecast to increase by 0.20 mb/d, similar to the levels seen in 2014.

Middle East
In Saudi Arabia, December 2014 oil demand was robust once more in line with the healthy oil demand performance achieved in 2014. Product demand grew by more than 0.23 mb/d or 10% y-o-y led by the uptick in fuel oil demand as production from the new refineries has become available for domestic consumption. Additionally, colder-thananticipated weather conditions in the central and northern parts of the country prompted additional usage for power generation. Fuel oil and direct crude burning consumption have increased by 0.19 mb/d and 43 tb/d, respectively, as compared to December 2013, an increase of around 43% and 13% y-o-y. Information for 2014 showed a similar pattern of oil demand consumption data, both in terms of the overall scale of the growth and the products leading those increases. Oil demand increased by around 0.21 mb/d, which equated to more than 9% y-o-y, led by fuel oil and direct crude for burning.

Other countries in the region showed mixed performances. While oil demand in Iraq continued to decline for the seventh consecutive month ? lower y-o-y by 0.12 mb/d ? consumption from UAE, Kuwait and Qatar was on the rise. Going forward, Middle East oil demand is subject to the performance of the various economies in the region with the impact of lower oil prices on their spending plans. For 2014, Middle East oil demand growth is anticipated to hover around 0.25 mb/d, while oil demand in 2015 is projected to grow by 0.29 mb/d.

China
In December 2014, Chinese oil demand continued its high pace of growth, increasing by 0.66 mb/d or more than 5% y-o-y. 2014 average growth for China stands at around 0.39 mb/d or nearly 4%. In December, oil demand growth was determined by rising gasoline, LPG and diesel requirements while fuel oil consumption decreased. Gasoline demand moved in line with rising car sales in December. According to statistics and analysis from the China Association of Automobile Manufacturers (CAAM), Chinese automobile sales were 16% higher y-o-y. 2014 also highlighted significant increases in car sales with total units sold reaching 23 million units, up by 7% y-o-y compared with the 14% growth rate of 2013. In December, gasoline consumption grew by more than 0.30 mb/d or 13% compared with the same month a year earlier, yet this growth was capped by an increase in consumption taxes as Chinese authorities continued to raise tax levels as a means of limiting air pollution.

Additionally, the increase in LPG requirements can be attributed to the country’s expanding petrochemical industry as LPG grew by more than 0.27 mb/d or 27% y-o-y. Diesel oil also increased by around 0.25 mb/d or more than 7% y-o-y, continuing its good performance in 4Q14. The pickup in diesel requirements was mainly due to improvements in weather conditions as well as the implementation of new very sizeable construction projects focused on the transportation sector.

Fuel oil increased in December by more than 26% y-o-y, a result of the higher utilization rate by teapot refineries, which are major consumers of fuel oil in China. Fuel oil demand growth was lower in 2014 by more than 12% y-o-y, the first decline after three years of growth.

The 2015 outlook is relatively in line with last month’s MOMR with equal upward potential/downward risks; the downside risks are focused on the likelihood of slower economic activities as well as the implementation of transportation fuel consumption measures geared towards curbing demand. The solid petrochemical sector and expansions in refining capacity, on the other hand, could be considered as elements supporting upward potential to 2015 oil demand estimates. For 2014, Chinese oil demand is anticipated to grow by 0.39 mb/d, while oil demand in 2015 is projected to increase by 0.31 mb/d.



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