World oil demand in 2012
Various economic developments worldwide are almost offsetting each other, leaving the total oil consumption picture nearly unchanged from last month. US demand is weakening further due to a sluggish economy, the European economic turbulence is suppressing that continent’s demand, and Indian demand is negatively affected by the recent massive floods. In contrast, the shutdown of most of Japan’s nuclear power plants has led to the excessive use of crude and fuel oil burning. The first half of this year has witnessed various economic developments worldwide which have created much uncertainty about oil demand. And the second half of the year may experience similar uncertainty, since the world economy is in an uncertain state. US and European demand will contribute the largest share of the uncertainty. Hence, world demand prospects in the second half will remain vague. While these two regions are squeezing down oil demand, other, non-OECD regions’ demand is pushing for more consumption. Furthermore, the Japanese shutdown of its nuclear plants is leading to more fuel- and crude oil-usage in the power sector. Nevertheless, should the country decide to bring its nuclear power plants back into full scale service, the country’s excessive oil usage would slow dramatically. Given the current global situation, world oil demand growth is forecast at 0.9 mb/d year-on-year (y-o-y) to average 88.7 mb/d.
OECD — North America
The latest easing of oil prices coincides with the beginning of the summer. Should the current price levels be maintained across the summer, then this, of course, would have a positive effect on gasoline consumption in the US. Nevertheless, a possible economic setback would, to a certain degree, push the country’s oil usage down further. On average, any change in retail gasoline prices of 10% would add or subtract around 40 tb/d to or from total gasoline consumption.
The monthly US oil consumption data for April shows a 1.7% y-o-y contraction. This is the 13th consecutive decline, since the last growth observed for US monthly oil consumption was for March 2011. All main product categories, with the exception of gasoline and propane propylene, fell and the bulk of contractions were seen in residual fuel oil and distillate consumption, as a result of decreasing industrial production and fuel-switching to natural gas. The first six months of2012 were generally quite disappointing for US consumption, with contractions in all product categories and this was especially strong for residual fuel oil, distillates and gasoline. The main factors influencing US consumption during that period were ongoing economic concern, relatively high fuel prices and fuel-switching. Preliminary weekly data for May and June shows no real improvements to US consumption, decreasing by around 1% each month. For both months, some industrial fuels showed signs of rising consumption. Nevertheless, the prospects for US consumption for the rest of 2012 remain rather pessimistic, depending upon the development of the economy and the transportation fuel price levels.
Reported data for Mexico in May shows a strong increase in consumption of around 5%, compared with the same month last year. All product categories were positive, except fuel oil, with increases in industrial fuels dominating. As for Canadian oil-usage, the latest available oil demand data indicates a sharp increase of 4.9% y-o-y; oil-usage in transportation and industrial products dominates this increase. In 2012, North American oil demand is projected to decrease by 0.14 mb/d to stand at 23.4 mb/d.
US auto-sales continued to accelerate sharply in June, despite worries about fuel prices as an indicator of an improving overall economic outlook and marketing incentives. June sales rose by approximately 17% from a year earlier. Furthermore, this higher demand for cars resulted from the replacement of aging vehicles as well. The most recent available data for Canada shows vehicle sales in the country grew by a powerful 18% in May y-o-y. This increase occurred for the eighth consecutive month and resulted from increasing numbers of consumers replacing their vehicles with revamped or fuel-efficient cars and trucks. According to the Mexican Automobile Industry Association, the country’s auto production, sales and exports grew by 2.8%, 17% and 5.7% respectively y-o-y in May.
OECD — Europe
European oil consumption contracted again in May, the ninth month in a row. May’s consumption in Germany, France, Italy and the United Kingdom fell, as a result of decreasing demand for industrial fuels. This was caused by weak industrial activity and shrinking transportation fuels, due in turn to relatively high prices and rigorous taxation. Nevertheless, the short-to-medium-term development of European oil consumption will be determined most of all by the continuing debt problems in several of the continent’s economies. Since regional oil demand has already dipped sharply, the effects of further negative economic setbacks are not likely to be that strong. European ‘Big Four’ oil demand decreased by 0.07 mb/d in May, compared with the same month a year earlier. The Big Four’s consumption of industrial fuels and transportation fuels accounted for the bulk of these decreases. For 2012, OECD Europe’s oil consumption is expected to shrink by 0.34 mb/d y-o-y, to average 13.9 mb/d.
OECD — Pacific
In Japan, the latest May 2012 monthly data is dominated once more by huge increases in the direct use of crude and residual fuel oil, as a result of nuclear plants being shut down. Due to the shutdown of most of these plants, and in combination with stricter stress tests being one of several conditions for their restarting, direct crude and residual fuel burning for electricity production is expected to increase throughout 2012. Power plants are using crude — and only those crudes with a low sulphur content —, fuel oil and liquefied natural gas (LNG) for electricity power-generation. Moreover, driven by increases in both mileage and the number of vehicles, as a result of government incentives, as well as starting from a very low baseline, transportation fuel consumption has risen, too. In South Korea, April oil product sales climbed strongly, increasing by 5.8% y-o-y; the biggest additions have been observed in gas/diesel oil and gasoline.
OECD Pacific oil consumption is expected to grow by 0.29 mb/d in 2012, while the bulk of the increase will result from direct crude/fuel oil burning for electricity generation and the substitution of nuclear plants. Driven by government incentives and subsidies, Japanese auto sales continued to rise strongly in June, by a remarkable 43.6%. This trend was seen in the fourth quarter of last year and the first quarter of this year. Japanese auto demand is expected to rise strongly for the rest of the year, partly due to higher sales in tsunami-hit areas, as the government continues itsm efforts to stimulate demand for special cars, such as hybrids, pure electric cars and other vehicles that employ advanced technology like clean diesel engines. South Korean domestic car sales fell by 3.5% y-o-y in June, while exports grew strongly by 8.9% y-o-y for the same month.
India’s recent floods will affect the country’s fuel consumption for June, not only in agriculture, but in the transport sector as well. Total oil demand is forecast to grow this year by 3.5% y-o-y, despite the big increase in the first quarter. Demand in May was strong, touching on a 5.4% increase y-o-y. The use of liquefied petroleum gas (LPG), diesel and naphtha led to this growth. Diesel-use was up by a massive 9%, adding another 0.12 mb/d to the country’s total oil demand. This excessive diesel demand resulted from a power-shortage in coal-operated power plants, which, in turn, led to the use of diesel in power-generators. Strong demand for diesel is expected to last until the end of the year, as long as the government does not interfere and increase retail prices.
Furthermore, the railways are stepping up their demand for diesel, as summer operations take place. Also, another factor that has boosted the use of diesel is the growth in new trucking registrations countrywide. Gasoline demand plunged by 4%, as a result of the price increases which were introduced by the oil companies in May. For 2012, India’s oil demand is expected to grow by 0.12 mb/d y-o-y. According to the Society of Indian Automobile Manufacturers, domestic passenger car sales increased by a robust 7.6% during May y-o-y, despite higher fuel prices, Increased excise duties on all car models and rises in vehicle prices. Indonesia is the second largest oil-consumer in ‘Other Asia’, after India; it will consume 1.4 mb/d by the end of 2012. It is forecast that the country’s oil demand will be 5.4% higher this year than last. This strong demand is related to economic activity which has pushed up the nation’s GDP by 5.8% this year. The country’s second-quarter oil demand is expected to grow by 30 tb/d y-o-y. Given the healthy economies in most of Other Asia, this region’s oil demand growth is estimated at 0.2 mb/d y-o-y.
The decline in crude-burning reduced Saudi Arabian oil demand by 0.04 tb/d in May y-o-y. However, this is not expected to be repeated in the peak of the summer, where demand for electricity is at its highest. Saudi motorists consumed almost half a million barrels of gasoline daily in May. Transportation fuel is growing at a fast rate, as a result of strong economic activity. Middle East oil demand is forecast to grow by 2.4%, to average 7.7 mb/d in 2012. Despite the decline in gasoline-usage, Brazilian oil demand grew by 3.2% in April y-o-y. Energy-related alcohol demand rose by more than one-third. The country’s average consumption of energy related alcohol is estimated at 0.16 mb/d in the first quarter of this year. Industrial and transport sectors consumed 30 tb/d more diesel in April, in comparison with the same month a year ago. Latin American oil demand is expected to increase by 0.2 m/d to 6.5 mb/d in 2012. Developing countries’ oil demand growth is forecast at 0.6 mb/d y-o-y in 2012, to average 28.3 mb/d.
With its economic boom slowing slightly, China’s oil demand is easing somewhat, leading to an increase in the export of diesel. But demand is not expected to come down drastically. It has been buoyant most of the time, as the country’s thirst for energy never ends. Approaching summer time, the country might experience another electricity shortage, which would lead to higher demand for diesel by independent generators. Demand in May increased by a strong 5.2% y-o-y. This sharp increase was the result of higher consumption of gasoline and diesel. Transport fuel has been the mover in China’s oil demand growth over the past few years. Diesel usage inched up by 7.8%, or 138 tb/d, in May y-o-y. Diesel has been the dominant petroleum product in China. It is used by the transport, industrial and agricultural sectors. Almost one-third of the oil used in China comes as diesel and this trend is expected to remain for the medium term. There was no stock movement in the country’s oil industry in May. The highest build in China’s oil stocks was seen in February, when almost 1.0 mb/d was deposited in both commercial and strategic petroleum reserve (SPR) sites. China’s oil demand is expected to continue to grow, but not at the same rate as anticipated earlier in the year. China’s second-quarter oil demand growth is forecast at 0.45 mb/d y-o-y.
Data from the China Association of Automobile Manufacturers shows that the country’s automobile sales grew by a strong 22.5% in May y-o-y, while overall sales for the first five months of 2012 rose by only 5.5%. This increase has been attributed to stronger demand for sedans, sport utility vehicles and multipurpose vehicles. Moreover, a number of factors still impose a strong downside risk to the development of the Chinese market during 2012 and 2013, such as the end of tax incentives for small cars and authorities' efforts to curb traffic-congestion in the major cities. As of the beginning of this month, Guangzhou (after Beijing, Shanghai and Guiyang) has become the fourth city in China to limit car-sales, in order to alleviate traffic conditions and pollution. In addition, more and more auto-makers have begun to introduce new unconventional vehicles: Changan Automobile has commissioned 100 E30 pure electric taxis in a pilotoperation in Beijing’s Fangshan district; Chery, Zotye and Beiqi Foton are working at full throttle to tap into the electric taxi venture; and the electric minivans developed by Brilliance China are also shaping up. With lower operating costs in the public transport field than traditional fuel-powered vehicles, new energy products seem bound to play a role in the future, since the low-carbon concept has already become a trend in the current era.
World oil demand in 2013
Global economic challenges are causing a great deal of uncertainty for the 2013 oil demand forecast. World GDP growth for next year is forecast slightly lower than for this year. The slowdown is expected not only in OECD economies, but also in the non- OECD. As for total world economic growth, this will be almost 0.1% below that of 2012; most of this reduction is related to the OECD region. Economic growth in China and the Middle East is forecast to be less than that of 2012. As seen so far this year, total world oil demand growth is expected to take place in the non-OECD area, mainly China, India, the Middle East and Latin America. Although any possible rise in oil prices is expected to have a negative effect on transportation fuel demand, the sectors that will contribute the most to total oil demand are industry and transport. Industrial an petrochemical activity is expected to push up oil demand next year in the non-OECD region.
US gasoline demand will be mostly dependent upon oil prices. Gasoline consumption is expected to be slightly higher than this year; however, it will remain the wild card for 2013, since it could also be negatively influenced by the pace of the country’s economic recovery. World oil demand is forecast to continue to grow during 2013, to reach 0.8 mb/d y-o-y and average 89.5 mb/d, which will be 70 tb/d lower than the estimate for the current year. As with this year, industrial fuel, mainly diesel and naphtha, will be the products that experience the biggest growth in world oil demand in 2013, since the industrial sector will be the key oil-consumption driver. This will be supported to a certain degree by both the non-OECD and the OECD. Furthermore, as seen this year, oil demand in 2013 will start from a high baseline; however, given slightly stable economic activity, this will push up gasoline and jet fuel consumption. Yet the bulk of gasoline demand will come from the growing transport sector in non-OECD countries, as well as some amounts from North America and the Pacific. Efficiency in the auto industry has been improving and is affecting energy consumption. Governments are placing emphasis on allocating large amounts of subsidies to efficient vehicles, such as hybrids and electric cars. Oil demand growth of 0.98 mb/d in non-OECD countries will again account for almost all world oil demand growth next year, whereas the OECD will show a 0.4% demand contraction.
The OECD region is expected to consume 0.16 mb/d less oil next year than this year. This decline is attributed to the economically troubled Europe and US. The decline in OECD Europe oil demand is the result of the debt problems on the continent leading to a slowing economy. The EU ‘RED’ directive, which mandates the share of renewables to reach 20% of total energy-use by 2020, will affect next year’s total oil demand across Europe. North America’s oil usage is expected to be almost flat. The US will be the wild card for the oil demand forecast this year as well. The product that will affect the total demand estimate is gasoline. Prices and slow economic activity are the factors that are putting the transportation sector’s fuel-use in a stagnant state. Furthermore, the OECD Pacific, mainly Japan, will continue to show a slight increase of 0.8%, as a result of the economic recovery from the 2011 earthquake devastation and the shutdown of the nuclear power plants. Finally, normal efficiency trends, higher energy taxes, energy conservation, efficiency, alternative fuels and other factors are also contributing to the decline in OECD demand. As a result, OECD demand is forecast to decline by only 0.16 mb/d y-o-y in 2013, to average 45.3 mb/d.
For 2013, growth in US auto-sales is expected to slow to approximately 3%, reflecting lower expectations in the US and European economies, with the latter being the sentiment affecting consumer behaviour. Canadian vehicle sales are projected to increase only by a slight 1%, because of rather pessimistic market conditions. As for the European auto market, as a result of rather gloomy expectations about the development of the economy, 2013 is forecast to be another year of decline at about the same level as in 2012. In the OECD Pacific, demand for new cars in Japan is expected to grow again strongly — but at a slower pace than in 2012 — estimated at a growth rate of 8% y-o-y. The outlook for the South Korean auto market next year is largely dependent upon developments in the US and Euro-zone economies.
China issued a new policy last year, part of which was dedicated to supporting and encouraging technology that aims to increase energy-diversification, renewables and energy-storage. Furthermore, the country put into action its energy-reduction programme which calls for a total energy intensity-reduction per GDP of 40% by 2020. There is a certain degree of doubt about whether it will achieve that target; however, this move will affect the country’s total oil-use next year. China is placing certain limitations on new conventional car registrations, in order to limit cities’ trafficcongestion. Its oil demand in 2013 will be marginally lower than this year, as the country's GDP estimate is low to start with. An upward risk does exist, since the country's economy might perform better than anticipated. Most economic sectors are expected to perform strongly, calling for increased energy-usage.
The sectors that will affect energy demand the most are the transportation, industrial and agricultural ones. As seen in 2012, China is expected to contribute the most to world oil demand growth in 2013. It should be noted, however, that other sectors in China which serve as major energy-drivers, such as industrial production, in-land cargo, agriculture, construction, transportation and fishing, will show moderate-to-strong growth in 2013. The government is keen to pass any new increase in international oil prices to endusers. This move, along with any introduced fuel taxes, will curb energy-usage. More biofuel-usage and the building of more electric-powered inter- and intra-city railroads will affect, to a certain degree, the consumption of transport fuel next year. As part of China’s long-term planning, the country is increasing its use of nuclear and hydro- powered plants, which will have a negative influence on the consumption of coal and oil. China’s apparent oil demand is forecast to grow by 0.4 mb/d y-o-y in 2013, which is 50 tb/d lower than the estimate for the current year. As for the auto industry, the country’s domestic auto-sales for 2013 are forecast to increase by around 11% y-o-y. This is one-third of the normal growth that has been seen in the past few years.
India and the Middle East are estimated to show annual oil demand growth of 0.1 mb/d and 0.17 mb/d, respectively, in 2013. As was the case in 2012, the transport, construction and petrochemical sectors will be the main drivers behind the strong\ Middle East oil demand next year as well. India’s GDP has declined during the course of the year, and next year’s GDP is forecast at 6.4%. The country has adopted a pricing mechanism allowing a transfer of some of the higher prices to end-users. Although the agriculture, industrial and transport sectors are expected to be strong next year, the continued removal of price subsidies and other government policies are downside risks for oil demand growth in 2013. Fuel-switching to cheaper natural gas among the power plants will be a downward pressure on the country’s total oil demand. Due to its economic prosperity, the Indian auto market is forecast to grow by 15% y-o-y during 2013.
Oil demand forecast assumptions 2013
The world oil demand forecast for 2013 is based on the following assumptions:
World GDP will grow at a slightly slower rate than last year.
Oil prices will have an impact on transport fuel demand.
Normal weather is assumed.
The US economy is expected to stabilize; however, the rest of the OECD economies are facing some turbulence.
US oil demand is expected to be flat; but it will remain as a wild card in 2013 oil demand.
OECD economic movements will provide a major amount of uncertainty.
Further domestic price and tax hikes are expected in most of the non-OECD area.
Further policies directed towards a reduction in energy use will take place next year worldwide.
Most governments will place an emphasis on energy conservation and increase the use of
The Chinese economy is forecast to grow at 8.0% in 2013, down slightly from 2012.
The Middle Eastern economy is expected to slow slightly next year, compared with this year.
Various factors will slightly reduce oil demand growth in Other Asia and Latin America, such as price subsidy-removal, fuel-switching and energy-conservation programmes.
There will be a stronger utilization of nuclear and coal-power plants.
The continued shutdown of most of Japan’s nuclear power plants is assumed.
The world will see a strong movement towards the use of smaller, more economical vehicles, such as hybrid and electric cars.
Most of the growth in oil usage will be in the transport, industrial and petrochemical sectors.
Oil demand forecast scenarios
There is a wide range of uncertainty affecting next year’s oil demand forecasts. This suggests the need for two more scenarios for an upper and a lower range for oil demand growth. The ‘upper’ range is forecast at 1.0 mb/d, which will reflect settlement in oil prices, strong demand growth in the US, improvements in OECD Europe’s economies and a serious recovery in Japan. It is suggested that a quick recovery in the US economy, along with a stronger dollar, will lead to cheaper oil for US consumers. A healthy US economy will speed up other non-OECD economies as well, such as the Middle East, Other Asia and Latin America. One important factor that might affect world oil demand is the price of natural gas. The Japanese nuclear power plant shutdowns could be prolonged until the end of next year, leading to further crude- and fuel oil-usage in conventional power plants.
The ‘pessimistic’ approach suggests lower oil demand growth of 0.65 mb/d, reflecting a delay and more turbulence in the economic recovery within OECD countries, which might spill over to other economies. Higher gasoline prices would have a reflex effect on US motorists. Strong retail petroleum product prices would suppress transport fuel consumption, mostly in the OECD. Weaker gasoline consumption alone could trim at least 100 tb/d from the expected oil demand growth next year. China’s and India’s efforts to remove price subsidies and place more taxes on fuel would put a dent in oil usage, mainly for transport fuel. If the winter is warm, then a further decline in winter products will be seen. Should natural gas prices in 2013 show a further decline, then fuel oil consumption would decrease worldwide as a result of further fuel-switching, especially during a strong winter.