Latin America Oil Demand - March 2016

Brazilian oil demand had a sluggish start in 2016 with oil demand dipping by more than 0.3 mb/d y-o-y. This was in line with weakening macroeconomic data. This has brought total consumption in Brazil down to 2.13 mb/d.

Declines were witnessed across all products, with fuel oil, diesel oil and gasoline weakening the most. Fuel oil demand declined by more than 22 tb/d, or more than 22% y-o-y, to reach total consumption of 76 tb/d in January. Consumption declined in January 2016 on a high base line effect, which had shown high fuel demand in January 2015, due to persisting drought conditions increasing the use of fuel oil to compensate for a reduction in hydroelectric power generation. Additionally, deteriorating economic factors contributed negatively to fuel oil demand numbers as less consumption was seen in the power generation sector and in the use of fuel oil in as a bunker.

Diesel oil demand was lower by a massive 0.16 mb/d, or around 17% y-o-y, registering the deepest decline since 2000. Potential diesel oil demand growth appeared to be waning at this stage as supporting economic factors disappeared. The industrial sector recorded sluggish numbers, which were coherent with poor manufacturing activities.

Similarly, gasoline demand dropped sharply, declining by 0.11 mb/d or around 14% y-o-y. Gasoline declined despite being economically more viable for consumers than ethanol as the economics for ethanol consumption weakened in January. Ethanol demand also decreased by around 8 tb/d, or 3% y-o-y, as prices increased and as ethanol reduced its competitiveness to gasoline.

Oil consumption in Argentina was slightly in the positive territory during the month of December 2015. However, it recorded a significant rise for 2015 on a cumulative basis. Oil demand increased in the country by around 30 tb/d or more than 4% y-o-y in 2015.

On a cumulative basis, all transportation fuels were in positive territory, with gasoline and diesel oil rising around 6% and 5% y-o-y, respectively. Fuel oil also recorded significant progress in 2015, adding some 20% from the levels witnessed in 2014. Total consumption reached 0.69 mb/d in 2015.

Looking forward, the risks for oil demand potentials for 2016 are currently skewed to the downside, with economic conditions in Brazil – and other countries in the region – anticipated to weaken and as government spending on projects is anticipated to be reduced. The Olympic Games in Brazil in August 2016 are currently the only bright spot in the region, with demand for transportation fuels projected to provide support towards the end of 2Q16 and 3Q16. On the other hand, the presence of lower oil prices, in addition to unusual weather conditions in the region, should support demand for power generation.

Latin American oil demand declined by 8 tb/d in 2015. During 2016, oil demand growth is forecasted be slightly higher than 2015 to record growth of 51 tb/d.