Latin America Oil Demand - September 2016

In July 2016, product demand eased further in Brazil, shedding more than 0.15 mb/d, or 6.2%, y-o-y, largely a reflection of the weak economic situation in the country. Cumulatively, with data up to July, oil demand shrank by around 0.13 mb/d, or 5.2%, y-o-y.

In July, all products showed declines, with the exception of gasoline. Gasoline requirements inched up by a mere 4 tb/d, or 0.6%, y-o-y, leading to total demand of 0.70 mb/d. The increase in gasoline consumption was at the expense of ethanol, which shed around 48 tb/d, or 15.3%, y-o-y. As previously reported, this is a price-related phenomenon as lower gasoline prices promote additional demand.

Diesel oil demand fell by 54 tb/d, or more than 5.4%, y-o-y, with total consumption below 1.0 mb/d as major macroeconomic indicators of the country showed continued declines. The PMI remained below the 50 point threshold and registered around 46 points, however, it increased from the level of 43 recorded in June.

On the positive side, the consumer confidence index improved during the month of July for the third successive month and recoded 76.7, up from 71.9 in June. Moreover, the Olympic Games are expected to lend some support to transportation and power generation fuels in August. Fuel oil demand also weakened in July as data showed a reduction of 32 tb/d, y-o-y, as fuel oil substitution with hydro and wind in the power generation sector continued to take place.

In Argentina, the latest available data for the month of June 2016 showed flat development in oil demand growth data. While transportation fuels recorded some gains led by jet/kerosene, those gains were counterbalanced by declines in petrochemical feedstocks and power generation fuels, namely LPG and fuel oil.

In 2017, projections for oil demand growth in Latin America are similar to last month’s projections, accounting for general improvement in the overall economy of the regions. Brazil is projected to be the main contributor to growth, with transportation fuels leading the way.

Latin American oil demand is expected to decrease by 0.06 mb/d in 2016, while in 2017, it is forecast to rise by around 0.07 mb/d.