Latin America Oil Demand - July 2016

Oil demand in Latin America is projected to decline in the current year by an estimated 30 tb/d for the second year in a row. In April 2016, product demand fell in Brazil compared to a year earlier, losing more than 50 tb/d, which equates to more than 2% y-o-y.

The decline apparently reflects the weak pace of the country’s economic momentum as the manufacturing PMI of Brazil stayed in contraction territory. All products performed below expectations, with the exception of gasoline and LPG which grew by around 5% and 4% y-o-y each. Gasoline prices continued to be lower than ethanol during the month of April, encouraging additional consumption of gasoline.

Products gained around 31 tb/d y-o-y in April, which marked the fourth successive month of growth.

On the other hand, ethanol consumption dipped due to less attractive prices compared to gasoline, while products declined by more 23 tb/d, or around 8% y-o-y. Based on data from January to May, ethanol consumption declined by around 40 tb/d while gasoline demand grew by 13 tb/d y-o-y.

The overall performance of the Brazilian economy, along with the continuation of political challenges in the country, remain the primary factors behind the slow-down in the country’s oil demand growth in 2016. Fuel oil and diesel oil also declined as a result of these factors, by around 36% and 3% y-o-y, respectively.

In Argentina, which accounts for more than 10% of Latin America’s oil demand, consumption of oil products declined in April by around 5 tb/d, or 1% y-o-y, despite the positive performance of most products, with the exception of LPG and the “other products” categories, which fell by around 21% and 2% y-o-y, respectively. Total consumption was pegged at 0.72 mb/d.

In Ecuador, oil demand declined in May 2016, shedding around 9% y-o-y mainly because of a massive 44% y-o-y decline in fuel oil, which feeds into the power generation sector.

Similar trends were also observed in Venezuela, where oil demand also declined by around 4% y-o-y, with fuel oil being the largest contributor to this decline, shedding some 24 tb/d y-o-y.

In 2016, Latin America oil demand is projected to contract by 30 tb/d, which is slightly better than the decline recorded in 2015.