World oil demand in 2008
Consumption of winter products declined in the first quarter in the OECD as a result of the below normal winter temperatures. In addition, in the OECD, especially in the US, demand for transport fuel (mainly gasoline) did not grow as expected as a result of slow economic activities and higher oil prices. Other product growth in the other OECD regions was not enough to offset the decline in oil demand in the US in the first five months of 2008. Slow US economy along with current oil prices will have its effect on oil demand not only in the US but across the OECD countries in the second half of this year.
China, the Middle East, Latin America, and India are expected to show healthy growth in oil demand for the remainder of the year. Despite the recent removal of price subsidies in some Asian countries, non-OECD is expected to show strong oil demand growth to some degree, partially offsetting the decline in the US, Europe, and the Pacific. Thus, world oil demand is forecast to grow by 1.1 mb/d in 2008 to average 86.88 mb/d, a downward revision of 0.1 mb/d from the previous report.
OECD North America
US oil demand is experiencing a strong decline, which is mostly attributed to the above-normal temperatures in the first quarter and to the recent slowdown in economic activities. In the first four months of the year, US winter product demand declined by 4.4% y-o-y. This decline represents the majority of the decrease in US oil demand. Furthermore, the gasoline demand dipped 10% y-o-y in the first four months. It is worth mentioning here that transport fuel consumption is at its low seasonality and the peak is usually in the summer. Unlike the US oil demand behaviour, Mexican oil demand grew strongly by 6.6% y-o-y in April. Gasoline and diesel demand grew the most, adding 69 tb/d and 60 tb/d to total oil demand in April. Canadian oil demand behaved positively in April growing by 2% or 32 tb/d y-o-y. However, this increase in Canada’s and Mexico’s oil demand is not enough to offset the decline in the US oil demand. As a result, first-quarter oil demand in North America was revised down by 0.3 mb/d to show a decline of 0.7 mb/d y-o-y.
Jet fuel demand has been affected by IATA procedures, which improved efficiency in the past year or so. Furthermore, the recent elimination of older jets which consume more fuel will reduce the demand for jet fuel in the short term.
OECD Europe
Apart from Germany, European oil demand showed a moderate decline in the first quarter as a result of warm weather and weak transport fuel demand. UK’s inland consumption declined by 0.05 mb/d y-o-y in the first quarter. Gasoline demand declined the most by 10.16%, reducing total demand by 42 tb/d. However, German oil demand grew in the first quarter adding 88 tb/d to total oil demand. Heating oil grew the most by 11.25% as a result of the normal winter. In April, Italian oil demand grew by 2.5% y-o-y. Furthermore, France’s oil demand in April was supported by the strong consumption of both distillate and heating oil. Hence, France’s inland oil deliveries grew by 7% y-o-y in that month.
Total OECD Europe first-quarter oil demand growth did not increase as expected because of the warm winter. Hence, oil demand in OECD Europe was revised down by 0.1 mb/d y-o-y in the first quarter.
The summer driving season along with the summer agricultural season is expected to boost diesel demand in Europe in the third quarter. Automotive diesel demand is forecast to grow by 3% this year due to the increase in new diesel-operated vehicles within the continent.
OECD Pacific
Despite the record-high price, Japanese gasoline demand shot up by 17.3% y-o-y in April. A strong increase in gasoline usage of 178 tb/d pushed the country’s total oil demand up by 5% in April. Japan’s oil demand grew by 0.13 mb/d y-o-y in the first four months. Japan’s total oil demand for the year is anticipated to show the same behaviour as last year, more than offsetting any increase in other countries in OECD Pacific. OECD Pacific oil demand is forecast to decline by 0.04 mb/d in 2008 to average 8.23 mb/d.
Early in the year, the warm weather in the Pacific affected winter product consumption negatively, which erased the annual winter consumption growth completely.
Developing Countries
A recent price hike of 10% in petroleum products triggered strong criticism within India. Although this increase will affect gasoline and diesel demand, it is not expected to greatly reduce consumption. India’s oil demand is forecast to grow by 140 tb/d y-o-y in 2008. Transport fuel, industrial, and agricultural sectors are expected to push oil demand growth up this year. Similarly, Malaysia has greatly increased gasoline and diesel prices which will reflect on the consumption of these products in the short term. Most Asian governments are considering a change in their price structure. There are some obstacles to that, such as the high rate of inflation within these countries and anticipated unrest. In fact, booming Asian economies are capable of absorbing the extra fuel cost in the short run. As a result of strong Indian oil demand, Other Asia oil demand growth in the first quarter was revised up by 0.06 mb/d to show an increase of 0.26 mb/d y-o-y.
Latin America’s strong economic growth of 5.1% is boosting oil consumption. In addition, controlled petroleum product prices are keeping transport fuel demand healthy. Brazil’s and Argentina’s oil demand were stronger than expected; hence the Latin American oil demand growth was revised up by 0.05 mb/d to reach growth of 0.23 mb/d y-o-y.
Given healthy oil demand growth in Other Asia, Latin America, the Middle East, and Africa, Developing Countries are expected to see growth of 0.66 mb/d y-o-y in 2008 to average 24.87 mb/d.
The strong Middle Eastern economies have not faced difficulties subsidizing petroleum products. Not only gasoline and diesel consumption but also industrial fuel demand are on the rise and are expected to do so for the rest of the year. Middle East oil demand growth is forecast to top 0.28 mb/d y-o-y in 2008.
Latin America’s strong economic growth of 5.1% is boosting oil consumption. In addition, controlled petroleum product prices are keeping transport fuel demand healthy. Brazil’s and Argentina’s oil demand were stronger than expected; hence the Latin American oil demand growth was revised up by 0.05 mb/d to reach
growth of 0.13 mb/d y-o-y.
Given healthy oil demand growth in Other Asia, Latin America, the Middle East, and Africa, Developing Countries are expected to see growth of 0.66 mb/d y-o-y in 2008 to average 24.87 mb/d.
Other Regions
Chinese crude imports were unexpectedly weak in April to average 4.1 mb/d, leading to a minor apparent oil demand growth of only 0.03 mb/d y-o-y. Weak April demand is expected to be more than offset over the coming months. Oil demand in China is forecast to grow by 5.7% or 0.4 mb/d y-o-y in 2008. A booming economy, strong new car sales, agricultural activities and the Olympic year are the main drivers behind China’s healthy oil demand. Vehicle sales grew by more than 19% in the first four months adding 3.5 million new vehicles to the street; however, this is less than the growth seen last year. Apparent oil demand in March reached a record high, crossing the 8 mb/d line. It is anticipated that 40% of the total world oil demand growth this year will be attributed to China alone. The recent earthquake mostly affected rural areas and should not impact oil demand. In fact, the rebuilding effort will call for extra fuel in the end. China’s oil demand reaches a peak in the third quarter. As the summer approaches, China’s electricity demand is expected to be high which will lead not only to more coal but also to increased oil consumption. Third-quarter oil demand growth is forecast at 0.48 mb/d or 5.7% y-o-y. China third-quarter oil demand growth is forecast at 0.48 mb/d or 5.7% y-o-y.
