World Oil Demand in April 2015

Source: OPEC_RP150406 4/16/2015, Location: Europe

World oil demand growth in 2014 was revised marginally lower since the previous report to 0.95 mb/d. For 2015, world oil demand is forecast to grow by 1.17 mb/d, unchanged from the previous month, despite positive revisions to OECD Americas and Europe, which were offset by downward revisions elsewhere. Total oil consumption in 2015 is anticipated to be around 92.45 mb/d.

OECD Americas
The most recent monthly US oil demand data for January showed gains in oil requirements of around 1.8% y-o-y. These developments follow steady demand growth in 2014, especially in the fourth quarter, partly influenced by lower prices for gasoline and diesel oil. Considering product categories for January 2015, gains in gasoline of more than 0.5 mb/d or 6.2% y-o-y were partly offset by slight declines in demand for distillates and propane/propylene, the latter as a result of fuel substitution. Demand for gasoline was also in line with increasing mileage, especially supported by lower fuel prices.

Preliminary February weekly data showed slightly growing overall requirements during a month with exceptionally cold temperatures. However, driving and gasoline demand were down compared with the previous month a year earlier, while distillate and jet fuel demand grew.

March preliminary figures suggest once more overall strong growth of around 4.0% y-o-y. Gains in gasoline and jet fuel oil demand were partly offset by losses in residual fuel and distillate requirements. While 2015, US oil demand remains strongly dependent on the US economy, risks are more skewed to the upside compared with the previous month’s publication, especially as a result of the low oil price environment.

In Mexico, February was another disappointing month for oil demand, characterized by falling requirements in all product categories, with the largest decline seen in residual fuel oil as a result of fuel substitution with natural gas. Mexican oil demand is projected to fall slightly in 2015; risks are more skewed to the downside compared with the previous month’s report.

The latest January data for Canada shows overall declining oil requirements with all product categories falling, notably transportation fuels, which have been affected by cold weather, similar to the US. The 2015 projections for Canadian oil demand remain unchanged from those reported one month ago.

In 2014, OECD Americas’ oil demand grew by 0.09 mb/d compared with a year earlier. 2015 demand for oil in OECD Americas is projected to grow by 0.21 mb/d compared with the previous year.

OECD Europe
Upward movement in European oil demand during December 2014 continued during the first two months of 2015, as a result of several factors, including the current oil price environment, which favours oil usage in the road transportation sector, the low baseline during the last three years, and the seemingly improving economy in some parts of the region. February Big 4 total oil demand data indicates a 1.9% increase y-o-y, with almost all product categories increasing – distillates, jet fuel, LPG and gasoline rose – while residual fuel oil fell. Declines in oil demand for most countries with debt issues seemed to have reversed. January oil demand grew solidly in Spain and Greece y-o-y. Factors which could possibly further boost European oil demand in the short term are increasing industrial production and an auto market which has overcome a very long negative history, showing gains in February for the eighteenth consecutive month.

Downside risks are mainly financial in nature, and remain the same as in previous months. They include unsolved debt issues in a number of countries in the region and ongoing austerity measures, as well as strongly taxed European oil demand. Yet, general expectations for the region’s oil demand during 2015 have improved since the previous month’s projections and are largely connected to developments in the economy and the current oil price environment.

In 2014, European oil demand shrank by 0.18 mb/d while oil demand in 2015 is projected to again contract, but to a lesser extent, by 0.06 mb/d.

OECD Asia Pacific
February Japanese oil demand decreased 2.8% y-o-y with diverse developments in the main product categories. Oil requirements in crude and fuel oil for electricity generation fell as a result of continuing substitution with natural gas and coal, while demand for gasoline, LPG, and particularly jet fuel naphtha grew solidly. The backbone of Japanese oil demand growth seemed to be focused solely on petrochemical activities in the country, moving away from previously predominant electricitygeneration fuels, namely crude and fuel oil.

The outlook risks for 2015 remain unchanged from the previous month’s forecasts and are determined by the likelihood of operation restarts in some of the country’s nuclear plants during 2015.

In South Korea, January came up strongly, increasing y-o-y. Flourishing petrochemical activities – which called for rising naphtha and LPG requirements – accounted for the bulk of the increases. Demand for transportation fuels also grew, particularly gasoline. The outlook for South Korean oil consumption during 2015 remained unchanged compared with the previous month’s projections.

OECD Asia Pacific oil consumption in 2014 shrank by 0.18 mb/d. This downward trend will continue in 2015 but to a lesser degree, by 0.12 mb/d.

Other Asia
India’s oil consumption continued to accelerate significantly in 2015, with yet another month of very positive oil demand growth data. February demand increased by more than 0.35 mb/d or 9% y-o-y, the largest increase since August 2012, while total consumption reached more than 4.10 mb/d. Strength in demand was not only supported by the notable growth in LPG and gasoline – which has been on the rise for more than 18 months – but also by diesel oil and fuel oil, which grew substantially during the month of February.

India’s gasoline demand rose in February, with total consumption levels reaching above 0.50 mb/d for only the second time in history, according to data dating back to early last decade. Growth was around 80 tb/d or more than 18% y-o-y. In addition to the positive effect of good weather conditions across the country on vehicle movement, passenger vehicle sales statistics were a factor. Overall passenger vehicle sales recorded growth of around 8% in February, with two-wheeler sales at more than 1.2 million units. This growth continued to support the upsurge in gasoline demand, despite India’s government raising fuel taxes four times since November 2014 during a time of declining international oil prices.

Another observed development was the persisting growth in LPG, which rose more than 40 tb/d, or around 8% compared with the same period in 2014, on the back of a continued pick up in residential usage as logistical constrains eased and the number of subsided cylinders increased.

Similarly, Indian diesel oil demand increased substantially in February, contrary to the normal seasonal pattern; it traditionally peaks in summer. Growth stemmed from increased construction in infrastructure projects. Diesel grew by more than 0.11 mb/d or close to 8% y-o-y, the highest growth reading since January 2013. Fuel oil demand growth was also markedly positive, recording the highest rise since January 2008. This is a result of higher-than-anticipated consumption in the power and petrochemical sectors, as well as a low 2014 baseline. Fuel oil grew by around 72 tb/d or 32% y-o-y.

In Taiwan, oil demand declined for another month by almost 7% y-o-y, with the bulk of the decline originating in heavy products, including fuel oil and other products. Oil demand in the country is predicted to slow as exports – a major component of the Taiwanese economy – are expected to grow slightly above 1% in 2015, compared with 2.74% in 2014.

In Indonesia, the latest available January 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. Other transportation fuels have also grown going into 2015, particularly gasoline, diesel oil and jet/kerosene. Total consumption reached 1.46 mb/d with a growth magnitude of around 60 tb/d y-o-y.

The risks for 2015 oil demand in Other Asia are currently pointing upward as a result of overall economic improvement in the biggest oil consumer in the region, India, and the steady general economic performance of some other countries in the region. Other Asia’s oil demand grew by 0.21 mb/d in 2014. For 2015, oil demand is forecast to be 0.26 mb/d higher than for 2014.

Latin America
In February 2015, oil demand in Brazil declined substantially by 0.17 mb/d or around 7% y-o-y. Total consumption was at 2.34 mb/d, the lowest level since March 2014. The decline was led by gasoline and diesel oil, which eased by 73 tb/d or more than 9% y-o-y and by 0.14 mb/d or 13% y-o-y, respectively. The reduction in gasoline demand was attributed to an announcement by the Brazilian government increasing gasoline excise duties, which took effect at the beginning of February 2015. As a result, retail prices for gasoline soared by around 7%, lowering gasoline consumption. Demand for diesel also declined, with total consumption at 0.91 mb/d, as truck drivers went on strike to oppose high fuel costs. This resulted in reduced truck movements and slowed trading as well as reduced agricultural activity in the country. Fuel oil demand slowed by 7 tb/d or around 6% y-o-y.

Oil consumption in Argentina declined slightly in January; transportation fuels eased, with diesel registering the most notable shrinkage, having a decline of more than 15% y-o-y. As highlighted previously, vehicle sales are projected to drop in 2015, as the government's scheme of subsidizing car purchases is expected to be eliminated, impacting sales growth and thus reducing transportation fuel consumption. Looking ahead, risks for 2015 oil demand growth in Latin America are currently pointing downward much like the previous month, as economic activity in Brazil is predicted to be slower than in 2014 and an increase in excise duties for gasoline is assumed to reduce gasoline consumption. Conversely, low oil prices in addition to the expectation of a hotterthan-average summer season should keep demand for power generation up. Latin American oil demand grew by 0.20 mb/d in 2014. During 2015, oil demand growth is forecast to be marginally lower than the previous year, reaching 0.19 mb/d.

Middle East
In Saudi Arabia, product categories saw positive performance during the month of February, with the exception of direct crude burning, which decreased by around 40 tb/d. This translates into more than 11% y-o-y, in line with seasonal norms for power generation consumption, which tends to ease during winter. Performance of transportation fuels, on the other hand, was on the rise, with jet fuel, gasoline and gasoil increasing by more than 21 tb/d, 66 tb/d and 61 tb/d y-o-y, respectively. Oil demand was higher by 0.16 mb/d, or 8%, in February, y-o-y.

Oil demand in Iraq continued to decline. The magnitude of the drop was strong in February, with total demand shrinking by more than 0.11 mb/d or around 16% y-o-y. All products saw decreases, with no exception. Oil demand in Iraq is traditionally driven by diesel oil – as both a transportation and industrial fuel – followed by fuel oil for power generation and gasoline for road transportation, all of which have recorded a significant drop in volume Projections for oil demand in 2015 remain as highlighted in the previous MOMR.

Nevertheless, persistent declining performance in certain countries of the region could, in turn, drive oil demand data lower, if not met by an equal rise from other countries. Middle East oil demand for 2014 grew by 0.25 mb/d, with matching growth expectations for 2015.

February oil demand in China retained positive growth at an estimated level of 0.34 mb/d, despite moderating growth in the country’s overall economy. The structure of Chinese oil demand continues to be characterized by rising gasoline usage in the road transportation sector, as well as high LPG demand for the petrochemical sector. The consumption of residual fuel oil declined, however, as a result of fuel substitution with natural gas and coal, particularly in the industrial sector.

LPG demand picked up in February, increasing by 75 tb/d or more than 7% y-o-y. The LPG cost advantage over other fuels, as well as the demand for existing and planned additions of dehydrogenation (PDH) plants, supported LPG consumption and was expected to keep product demand intact over the next months.

Gasoline consumption rose compared with the same period in 2014, with growth levels above 47 tb/d or close to 2% y-o-y. Retail sales were robust in February, encouraged by additional driving for the Chinese New Year. According to the China Association for Automobile Manufacturers (CAAM), auto sales increased by more than 6% y-o-y and SUV sales registered an increase of more than 94% over February.

Diesel oil demand, on the other hand, was lower compared with February by around 0.21 mb/d or by 6% y-o-y, mainly as a result of a slowdown in activities at mining plants, infrastructure construction and other gasoil-consuming sectors due to the lunar New Year holidays. Expectations for diesel demand are going forward, supported by expansion projects in the railway transportation sector. Consumption of fuel oil was largely reversing, as initial data seemed to suggest a decrease in growth of around 0.17 mb/d or around 22% y-o-y. Slower industrial activity – as well as weaker teapot refinery margins – seemed to be the largest contributor to this slowdown.

The 2015 outlook for China remains balanced, with downside risks linked to a slowing of the economy, as well as policies supporting a reduction in transportation fuel consumption. Conversely, expansion in the petrochemical sector – especially in PDH plants and projects in the refinery sectors – constitute the upside potential for China’s oil demand growth.

For 2014, Chinese oil demand is estimated to have grown by 0.40 mb/d, while oil demand in 2015 is projected to increase by 0.31 mb/d.

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