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World Oil Demand - September 2015

Source: OPEC_RP150906 9/15/2015, Location: Europe

World oil demand growth in 2015 was revised upward by around 84 tb/d as a result of better-than-expected performance from OECD America and Europe in 1H15. As a result, 2015 world oil demand growth currently stands at 1.46 mb/d, leading to total global consumption of 92.79 mb/d.

In contrast, world oil demand growth in 2016 was revised downward by 50 tb/d due to the projected slower economic momentum in Latin America and China. World oil demand growth is now anticipated at 1.29 mb/d, leading to total global consumption of around 94.08 mb/d.

OECD Americas
The latest monthly data implies bullish US oil demand for June 2015, showing a y-o-y increase of about 0.7 mb/d or 3.8%. Approximately half of the growth in June 2015 oil requirements, around 0.35 mb/d, originates in gasoline, which was particularly supported by low fuel prices – approximately 27% lower than the same month in 2014 – and higher mileage – around 3.9% y-o-y. Growing gasoline demand is in line with an expanding US vehicle market, particularly for sport utility (SUV) and cross-over vehicles. Steep increases in oil requirements have also originated in jet/fuel and propane/propylene requirements, while the overall June 2015 oil demand growth of 0.7 mb/d has been only partly offset by declines in the requirements for distillates and residual fuel oil. Six months in 2015 show US oil demand higher by around 0.4 mb/d compared with the same period last year. The main characteristics in 1H14 were strongly growing gasoline and propane/propylene demand, while residual fuel oil and distillate requirements declined. July 2015 figures, which are based on preliminary weekly data, show an increase of around 4.4% y-o-y, with gasoline and jet fuel requirements rising, but are partly offset by disappointing distillate and residual fuel oil demand. August 2015 preliminary data for the main products indicates another strong month in US oil demand, with gasoline being the leading product in the main month of the holiday driving season. As a result of these factors, US oil demand is projected to remain strong throughout the remainder of 2015, with transportation fuels taking the largest share. Moreover, the US is projected to remain the main contributor to OECD oil demand during 2015 and 2016.

In Mexico, July 2015 was marked by strongly increasing gasoline, jet/fuel and diesel demand, which was partly offset by declining residual fuel oil requirements. Consequently, Mexican oil demand in July 2015 increased by almost 2% y-o-y. 2015 Mexican oil demand remained unchanged since last month and is expected to decline by 1.6% y-o-y; for 2016, oil demand is projected to grow again slightly as a result of positive economic expectations.

Canadian oil requirements fell for another month y-o-y in June 2015, with all the main product categories, except LPG, declining. Projections for 2015 Canadian oil demand remain at the same level as in the previous month, leaving oil requirements during 2015 declining compared with 2014. Depending on the development of the overall economy, 2016 growth in Canadian oil demand is projected to slightly exceed 2015, which has remained unchanged since last month.

After the latest upward revision to 2015 OECD Americas demand data, 2016 oil demand in the region is now anticipated to be almost unchanged from 2015. Oil demand growth in 2016 will be driven by a slight improvement in economic conditions. 2016 US oil demand is now projected to grow at a slower pace than in 2015. 2016 forecasts are focused on growth in the US economy and oil price levels. In addition to further expansions in the petrochemical industry, on the other hand, some downside risks would result from higher fuel substitution with natural gas and implementation of fuel efficiencies in the road transportation sector.

In 2015, OECD Americas oil demand is projected to grow by 0.33 mb/d compared with 2014. 2016 OECD Americas oil demand is forecast to increase by the same rate compared with 2015.

OECD Europe
European oil demand continued to rise in July 2015 for another month, increasing by an estimated 0.22 mb/d or more than 3% y-o-y in the Big 4 regional consumers (Germany, the UK, France and Italy). The increase was substantial and only slightly smaller in volume than in previous months this year, particularly 1Q15, which involved also the impact of cold weather and some low baseline effects. Although continuing economic concerns in some parts of the region pose some uncertainty as far as the development of oil demand in the region during 2015 and 2016, positive developments were the dominating factors during the previous month. Data for the first seven months of 2015 showed increasing European Big 4 oil demand by approximately 3.2% y-o-y, with transportation fuels, notably diesel, accounting for the bulk of the increases. This was in line with the positive momentum in auto sales, which showed solid increases of around 8% during the first seven months of 2015 y-o-y, and with solid expansions in all major auto markets. The general expectations for the region’s oil demand during 2015 have certainly improved since last month’s projections, but are still coupled with uncertainties that depend on the region’s economic developments. Moreover, high taxation polices in oil use and fuel substitutions are the main factors that could curb oil demand, despite economic growth, low baselines and low fuel price environments. For 2016, developments in the region’s economies, in view of the low oil price environment, are the main assumptions for the OECD Europe forecast for 2016. From a products point of view, transportation fuels, particularly diesel and gasoline, are projected to lead oil consumption in 2016. On the other hand, high uncertainties linked to economic turbulences and budget cuts as well as fuel substitution and efficiencies in the road transportation sectors remain negative factors for oil demand in the region next year.

OECD Europe’s oil demand is projected to grow by 0.16 mb/d in 2015 for the first time since 2006, while 2016 oil demand is anticipated to remain roughly at the level of 2015.

OECD Asia Pacific
In July 2015, Japanese oil demand contracted slightly by 0.04 mb/d or around 1% y-o-y, with a mixed picture across product categories. Gasoline and naphtha experienced substantial gains of more than 5% and 12% y-o-y, respectively, while oil requirements in crude for direct burning and electricity generation fell for one more month by a massive 62 tb/d or more than 41% y-o-y, as a result of fuel substitution with natural gas and coal. A further decline in Japanese direct crude and fuel oil usage is expected in August, as a result of the restart of the first nuclear plant in the country. New auto sales in August 2015 were also less than promising, showing a 2% y-o-y decrease, the eighth consecutive monthly decrease. The outlook for 2015 Japanese oil demand has been lowered slightly from last month, with the risks being once more skewed towards the downside, as a result of weaker economic forecasts.

In South Korea, June 2015 oil demand came up increasing by more than 82 tb/d or approximately 3.5% y-o-y. Gains in the petrochemical industry, which called for increasing naphtha requirements and gas/diesel oil, were partly offset by sharply declining requirements in fuel oil and LPG. The outlook for South Korean oil consumption during 2015 and 2016 remains healthy, unchanged as compared to last month’s projections.

Oil demand projections for 2016 remain unchanged since last month and assume a higher likelihood that a number of Japanese nuclear plants will re-join operation. Additionally, slightly better economic conditions as projected for 2015 are also assumed. Petrochemical plants are expected to be the oil demand driver in 2016with a slight improvement in transportation fuels.

OECD Asia Pacific oil consumption is projected to fall by 0.11 mb/d in 2015, while the drop will continue also in 2016 by 0.14 mb/d y-o-y.

Other Asia
In India, oil demand growth remains strong, with July 2015 growth data showing a healthy rise. Oil demand increased by around 0.2 mb/d, or 5.5% y-o-y, a very optimistic kick start to 3Q15, taking total product consumption in India to 3.82 mb/d. In terms of product performance, fuel oil was the star product in July, rising by more than 50 tb/d or more than 25% y-o-y. The manufacturing sector performance played a part in this increase as sub-sectors such as steel and petrochemicals recorded increases in fuel oil requirements. Additionally, the manufacturing Purchasing Managers’ Index (PMI) registered its second highest reading in 2015, after the month of January, of 52.7 points, well above the threshold of 50, separating expansion from contraction. For other products, the trend almost mirrors previous months, with LPG and gasoline dominating product growth with increases of more than 10% and 12% y-o-y, respectively. Growth in gasoline demand reached 53 tb/d y-o-y in July. This rise is attributed to a number of factors, including the reduction in gasoline retail prices, which have been reduced twice since June.

Sales of passenger vehicles, specifically the two wheelers that use gasoline as a fuel, continued to increase, reaching 1.3 million units in July, which is 0.3% above the same month a year earlier. This indicates a shift of consumer preference from diesel to gasoline vehicles. LPG demand has registered increases for almost 24 consecutive months, as a result of an increase in new connections and the streamlining of sales schemes between commercial and residential customers. LPG increased by 52 tb/d compared with July 2015. Diesel consumption, on the other hand, fell slightly by 7 tb/d or down by 0.5% y-o-y to reach total consumption of 1.48 mb/d. This slight drop can be a result of heavy rains reducing agricultural requirements in addition to a decline in the movement of goods between different states due to floods hindering transportation. In Indonesia, the latest June 2015 data shows yet another increase of around 1.8% after an increase of 2.7% y-o-y in May. All products showed positive performances with the exception of the “other products” category. Cumulatively, the 1H15 performance for Indonesia has been positive, increasing by around 43 tb/d, which equates to around 3% compared with the same period a year earlier.

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