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World Oil Demand - Sep 07

Source: OPEC_RP070901 9/14/2007, Location: Europe

World oil demand in 2007
World oil demand in August followed the typical summer seasonality trend. In that month, oil demand grew the most in the developing countries, especially China. Summer heat, agriculture and transport were the main drivers behind worldwide August oil demand. US oil demand declined unexpectedly in August as a result of weak gasoline demand. Given current world oil demand growth in the third quarter along with the anticipation of a normal winter in the fourth quarter, world oil demand growth for 2007 is forecast at 1.3 mb/d or 1.5%, broadly unchanged from the last MOMR. With airlines renewing their fleet and adopting better flying procedures, the consumption of jet fuel is on the decline. Efficiency in the airline energy industry is improving dramatically.

OECD-North America
Higher retail gasoline prices in the US did not hurt gasoline demand as badly as anticipated; however the bad weather did. Rainy weather in the Northeast and Midwest resulted in slower gasoline demand in August. Hence, US gasoline demand grew by only a third of what was anticipated earlier reaching0.05 mb/d y-o-y. US oil demand declined by 0.5% or 0.1 mb/d y-o-y in August to average 21.2 mb/d. US January-August oil demand grew by 0.25 mb/d with gasoline rising the most by 0.1 mb/d. Mexico’s summer travel has pushed gasoline demand up strongly. In July Mexican gasoline demand growth reached 0.05 mb/d y-o-y to average 0.75 mb/d. As a result of strong growth in the transportation fuel sector, Mexican oil demand grew by 5.7% or 0.1 mb/d y-o-y to average 1.8 mb/d. Similar to Mexico, Canadian gasoline and diesel consumption grew by 30,000 b/d and 45,000 b/d pushing up total sales growth by around 4.3% in July y-o-y.

The third quarter is normally a low season for oil demand; therefore North America’s thirdquarter y-o-y oil demand growth is estimated at 0.2 mb/d to average 25.63 mb/d. Total OECD countries’ y-o-y oil demand growth in 2007 is estimated to increase by 0.1 mb/d to average 49.30 mb/d.

OECD Europe
European summer demand for transport fuel did not pick up as was seen in previous years. Diesel transport fuel is expected to increase by 3.5% this year as more than half of the newly sold cars will be powered by diesel engines. However, rising diesel demand is affecting gasoline consumption which is estimated to decline by 1.8%. As a result of declining transport and domestic fuel, oil demand in France declined by 0.5% y-o-y in July. Hence, oil consumption in France during January-July showed a y-o-y decline of3%. Germany’s diesel consumption plunged by 14% causing the country’s total inland deliveries to shrink by 8.7% in June y-o-y. Germany’s transport fuel was on the decline this summer. Growth in transport fuel in the UK prevented total consumption from declining although it remained flat y-o-y in June. Italy’s diesel demand grew by 5% in July putting total consumption flat y-o-y to average 1.7 mb/d in July. Due to weak oil demand in Europe, OECD Europe third-quarter oil demand is forecast to be flat y-o-y to average 15.57 mb/d.

OECD Pacific
Normal summer demand plus industrial oil consumption pushed South Korean oil demand up by almost 8% y-o-y in July. This higher demand led to an increase of 0.7% y-o-y in the country’s crude oil imports in the same month. The effect of the shutdown of Japan’s nuclear power plant was seen during the summer peak. Fuel oil consumption increased by around 70% as temperatures reached 35° Celsius in August. As a result, Japan’s oil imports increased by 7% y-o-y in July. Due to the sudden increase in demand in Japan, OECD Pacific third- and fourth-quarter oil demand growth is forecast at 0.07 mb/d and 0.1 mb/d y-o-y.

Developing Countries
India’s oil demand grew by a strong 3.96% or 98,000 b/d in July y-o-y. The healthy growth was boosted by both industrial and agricultural diesel consumption. Diesel demand represents 36% of India’s total oil demand and is forecast to grow by 9% to average 986,000 b/d. As a result of strong transport fuel demand, India’s oil demand is forecast to grow by 4.58% to average 2.74 mb/d in 2007 y-o-y. Other Asia third-quarter y-o-y oil demand is forecast to follow a high seasonality and grow by 0.19% to average8.83 mb/d. Gasoline rationing procedures in Iran have had a considerably negative impact on demand growth; however, this was partially offset by an increase in summer demand in other countries in the region. Transport fuel in the Middle East along with power plant demand for fuel oil boosted growth in the region; therefore fuel oil demand is forecast to be strong. Hence, Middle East third-quarter y-o-y oil demand growth is forecast at 0.3 mb/d to average 6.65 mb/d. Developing Countries oil demand is estimated to contribute the most to total world oil demand growth in 2007, increasing 0.66 mb/d to average 23.94 mb/d.

Other Regions
China’s crude imports grew by 30.7% y-o-y in the summer high seasonality of July to average 4.2 mb/d. As a result of the commissioning of a new oil storage site, some of these imports are used for SPR filling. China’s recent effort to curb air traffic is not expected to result in a large reduction in jet fuel demand. China’s aviation sector has been growing rapidly in the past few years which has led to a strong hike in fuel demand. China’s apparent demand in July grew by a strong 16% or 1.1 mb/d y-o-y to average 8.0 mb/d. This was the first time that Chinese apparent oil demand exceeded 8 mb/d. July’s high growth boosted third-quarter growth significantly; hence China’s third-quarter apparent oil demand is forecast to grow by 0.5 mb/d y-o-y to average 7.7 mb/d. Russia is planning to increase its export tax again. The newly proposed increase of 11.7% will affect FSU apparent demand upward. FSU third-quarter oil demand growth is expected to grow a marginal 0.04 mb/d y-o-y.

World oil demand in 2008
World oil demand is forecast to grow by 1.3 mb/d in 2008 to average 87.06 mb/d, in line with our last MOMR estimate. As a result of the governmental policy to curb the use of energy, China’s oil demand growth for 2008 is forecast at 0.4 mb/d, 0.05 mb/d below the 2007 growth figure. Transport and industrial fuel are the main growth sectors for world oil demand in 2008. Non-OECD countries will account for 1.1 mb/d or 79% of total world oil demand growth in 2008. OECD countries oil demand growth next year will mostly come from North America. North America’s oil demand is forecast to grow by 0.3 mb/d y-o-y in 2008 to average 25.91 mb/d. Middle East and Other Asia are expected to contribute 0.43 mb/d or 32% to next year’s world oil demand growth.

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