World Oil Demand - November 2017Source: OPEC_RP171106 11/13/2017, Location: Europe
World oil demand growth in 2017 was adjusted higher from the previous month by 74 tb/d, mainly to reflect better-than-expected data from China in 3Q17. As such, world oil demand growth for 2017 now stands at 1.53 mb/d to average 96.94 mb/d.
For 2018, global oil demand growth is expected at around 1.51 mb/d, revised up by 0.13 mb/d from the previous month’s expectations reflecting the improved expectations from OECD Europe, OECD Asia Pacific, China, India and some African countries. Total oil demand is projected to average 98.45 mb/d in 2018.
Based on the latest available data, OECD oil demand growth was revised marginally down by 10 tb/d in 2017. At the same time, the historical base line for 2016 was adjusted higher by 63 tb/d in 2016, also accounting for up-to-date data.
OECD America oil demand data implied slower-than-expected oil demand growth in all countries in the region, namely the US, Canada and Mexico. As such, 3Q17 data was adjusted lower by 50 tb/d.
The OECD Europe oil demand estimate was also adjusted lower in 3Q17 by 30 tb/d, mainly to adjust for slower-than-expected demand during the month of August. For 2018, oil demand growth projections were adjusted higher by 10 tb/d as compared to last month’s assessment, in line with the most recent economic outlook for Europe.
On the other hand, oil demand projections for the OECD Asia Pacific region were revised higher – by 70 tb/d in 3Q17 and 50 tb/d in the 4Q17, reflecting continuous positive momentum from South Korea and the new emerging demand from Australia. For 2018, oil demand growth estimations were adjusted higher by 10 tb/d as compared to last month’s assessment, to reflect the better economic outlook in Japan.
The latest US monthly data for August 2017 implied a strong downward revision of around 0.6 mb/d, as compared to previously available preliminary weekly data. Monthly August data showed a reversal to negative territory for implied y-o-y growth by around 0.1 mb/d, or 0.2 %, for the first time since February 2017. This decline followed months of solid increases in oil requirements throughout 2Q17 and in July 2017.
August 2017 oil demand was divergent, in terms of petroleum product categories. Requirements for transportation fuels – especially gasoline and jet/kerosene – grew solidly y-o-y, in line with the continuing low fuel price environment, increasing fleet traffic, as well as the overall healthily growing economy. During the same month, diesel oil requirements were also bullish, primarily as a result of healthy industrial activities, as compared to the same month in 2016.
However, petrochemical activities slowed down dramatically as a result of severe weather conditions in the Gulf Coast region. Consequently, demand for LPG and ethane as feedstock to the petrochemical industry fell sharply y-o-y and more than offset gains in the demand of other petroleum product categories.
Available data for ten months in 2017 – monthly data until August and preliminary weekly data for September and October – shows US oil demand growing by around 0.2 mb/d, with gas/diesel oil, jet/kerosene and gasoline taking the largest share in gains.
The overall risks for the development of US oil demand for the remaining part of 2017 and 2018 can be seen as skewed to the upside, mainly as result of strong anticipated economic growth and the support of the low oil price environment; nevertheless there are also factors that may push oil demand to the downside with fuel substitution and developments in vehicle efficiencies being the principal ones.
Mexico’s oil demand shrank in September 2017 by 0.04 mb/d, or 2.0%, y-o-y, representing the tenthmonthly decline in a row, and thus painting an overall bearish year-to-date picture during 2017. The bulk of oil demand losses during September 2017 originated in gas/diesel oil and gasoline, despite the low oil price environment. These have been partly offset by rising requirements for LPG, jet/kerosene and residual fuel oil. The risks for 2017 and 2018 Mexican oil demand remain skewed to the downside, despite the projected positive development of the overall economy, to a large extent as a result of anticipated fuel substitution.
In Canada, August 2017 saw a decline y-o-y. Small gains in naphtha, gasoline, gas/diesel oil and residual fuel oil have been more than offset by declines in LPG and jet/kerosene, with LPG being affected by fuel substitution. The prospects for Canadian oil demand in 2017 and 2018 are slightly positive as a result of a growing economy, while existing downside risks concern vehicle efficiencies and fuel substitution.
In 2017, OECD Americas oil demand is expected to grow by 0.24 mb/d, as compared to 2016. 2018 OECD Americas’ oil demand is projected to increase by slightly less compared with the current year, growing by 0.20 mb/d y-o-y.
August 2017 data showed weak European oil demand growth y-o-y, falling slightly and following strong months of May and June 2017. The majority of the main oil consuming countries in the region, with exception to Italy, Poland, the Netherlands and Belgium, saw oil demand declines y-o-y. Nevertheless, the implied year-to-date increase in European oil demand is substantial at 0.2 mb/d y-o-y and is in line with the region’s strongly increasing economy.
The growth in oil demand is dominated by bullish gas/diesel oil and gasoline demand in the road transportation sector as well as jet/kerosene and naphtha requirements for the aviation and petrochemical sectors. During August 2017, the positive momentum in auto sales continued to highlight another increase of more than 5% and with year-to-date growth of almost 5%. According to data from the European Automobile Manufacturers Association (ACEA), most major auto markets – Italy Spain, France and Germany – expanded solidly.
Early indications for September 2017 showed gains in oil demand of approximately 0.01 mb/d in Germany, and 0.03 mb/d in France, while oil requirements in Italy and the UK fell y-o-y by 0.09 mb/d and 0.11 mb/d, respectively.
The outlook for European oil demand during the remainder of 2017 is in general optimistic. 2018, however, faces uncertainties, which mostly concern the region’s high historical oil demand baseline, reduced oil price effects on road transportation fuels and economic uncertainties, pushing risks to be more skewed to the downside.
OECD Europe oil demand is projected to grow by 0.16 mb/d in 2017, while 2018 oil demand will grow by 0.08 mb/d compared with 2017.
Preliminary data for September 2017 implies that oil demand in Japan increased slightly by 0.02 mb/d, y-o-y, and for the first time in 2017. Gains were found in naphtha demand for the petrochemical industry, in addition to jet/kerosene and industrial diesel oil, while the performance of all other main product categories was in the negative. Losses have also been registered in volumes of oil for direct burning – crude and fuel oil – mainly as a result of fuel substitution.
The negative overall Japanese year-to-date oil demand growth in 2017 is generally in line with developments in the main economic indicators in the country and is expected to continue during the remainder of 2017 and in 2018. Additional downside risks for 2018 are possible further declines in fuel oil and crude direct burning demand, which may be partially offset by additional volumes of oil required for the country’s flourishing petrochemical industry.
In South Korea, oil demand in August 2017was bearish for the first month since May 2015, registering a y-o-y decline of 0.05 mb/d, or 1.7%. Diesel oil usage and fuel oil requirements in the industrial sector, together with gasoline demand in the transportation sector, took the lion share of the overall declines. Solid increases have nevertheless been observed in the demand for naphtha during the same month, y-o-y.
The outlook for South Korean oil demand during the remainder of 2017 and in 2018 remains positive with risks skewed to the upside.
With available data up to August 2017, year-to-date oil demand appears bullish in Australia showing growth of 0.10 mb/d, or 10.5%, with the most gains seen for diesel, in line with the booming country’s mining sector.
OECD Asia Pacific oil demand is expected to grow by 40 tb/d in 2017, while it is projected to marginally contract in 2018, y-o-y.
Based on the latest available data, oil demand growth in the non-OECD regions was adjusted higher by around 45 tb/d in 2017, reflecting better-than-expected data in various countries in the region.
China saw an upward revision by 0.17 mb/d in 3Q17 and 50 tb/d in the 4Q17, accounting for better-thanexpected demand by the industrial, petrochemical and transportation sectors in the country. For 2018, oil demand growth projections were adjusted higher by 60 tb/d as compared to last month’s assessment, in line with the most recent economic outlook for China.
In Other Asia, oil demand growth was adjusted higher by 30 tb/d in 3Q17, mainly reflecting better-thanexpected oil demand developments in India during September and in Taiwan, Malaysia and Hong Kong during the month of August. For 2018, oil demand growth projections were adjusted higher by 20 tb/d as compared to last month’s assessment, in line with improving expectations for Indian oil demand picture.
In Africa, in 2018, oil demand growth projections were adjusted higher by 20 tb/d as compared to last month’s assessment, in line with improving economic projection for several countries in the region including Morocco and Egypt.
According to the latest available data, September 2017 Chinese oil demand growth registered significant gains y-o-y, with demand growth estimated at more than 0.70 mb/d and total consumption reaching 12.2 mb/d. Increasing gasoline and jet fuel requirements for the transportation sector, in combination with rising LPG and fuel oil demand, accounted for the bulk of these gains.
LPG demand leaped strongly to reach 1.78 mb/d as propane dehydrogenation capacity (PDH) plants’ margins were healthy enough to increase their utilization rates. Additionally, two plants (Dongming Qianhai and Guangxi Yuchai Chemical) with a total LPG intake of around 0.7 mtpy have commenced operations in September, further boosting requirements.
Gasoline demand was higher by a staggering 0.24 mb/d y-o-y with support from healthy sport utility vehicle (SUV) sales. According to the China Association of Automobile Manufacturers (CAAM), total vehicle sales in September increased by around 5.4% y-o-y, resulting in higher y-t-d sales up to September by around 5.5% as compared to the same period last year. Passenger car sales increased in September by 2.7% y-o-y slightly lower than the growth seen a month earlier at 4.1% y-o-y. Commercial vehicle sales, on the other hand, rose substantially in September, up by 24.3% y-o-y. Cumulatively with data up to September, more than 21 million units were sold in 2017.
Diesel oil demand increased in September compared with the same month a year earlier by around 0.24 m/d, or 9%, y-o-y, mostly due to better-than-expected industrial activities, the end of the fishing ban and easing of environmental and safety checks. Jet fuel demand surged in September, rising by around 63 tb/d, or around 10%, y-o-y, mainly a result of higher-than-expected air travel during the month.
For 2017, projections for oil demand development in China are at higher than in the previous month’s report based on very strong data for September. In 2018, oil demand growth is foreseen rising firmly, albeit at a lower level than in the current year. The transportation sector will continue to show robust growth, supporting gasoline and jet fuel oil. The petrochemical sector is forecast to continue growing as new PDH plants are expected be commissioned in 2018, supporting LPG demand growth. Conversely, a continuation of fuel quality programmes targeting fewer emissions, further usage of new digital applications/software promoting vehicle/bicycle sharing and the ongoing fuel substitution with natural gas and coal are expected to limit demand growth in 2018.
Chinese oil demand is projected to grow by 0.46 mb/d in 2017 and is forecast to grow by 0.41 mb/d in 2018.
Indian oil demand show solid y-o-y gains in September 2017 following a weak y-o-y performance in August. Oil demand growth climbed by 0.42 mb/d, or a staggering 10.0%, to reach 4.70 mb/d, as compared to a year earlier.
In terms of products, the strong rebound in diesel oil consumption, which rose by 0.25 mb/d, or 17%, y-o-y, supported by automotive diesel, was the major factor behind the overall solid growth during the month. Commercial vehicle sales grew more than 25% y-o-y in September, marking the highest rate of growth since the end of 2011 lending support to diesel oil demand. This came despite easing construction activities and floods in many areas of the country.
Gasoline demand also grew in September, following broadly flat y-o-y data in the previous month. The product rose by around 0.10 mb/d, or 18%, y-o-y to stand at 0.65 mb/d. Passenger vehicle sales increased by more than 11%, with SUV sales increasing by more than 26% and total car sales rising by around 7% y-o-y. Two-wheeler sales, which consume gasoline as fuel of choice, increased by 9% y-o-y, supported by a recovery in sales from rural areas.
LPG continued to grow, rising by 31 tb/d y-o-y with total consumption at record levels of 0.83 mb/d. Housing demand continues to support Indian LPG demand, despite government efforts to reduce subsidies, which is anticipated to cap LPG demand growth in the future.
For the remainder of 2017, India is expected to be the main contributor to growth in the Other Asian region, however, the impact of the Goods and Services Tax (GST) is expected to moderate demand growth, particularly diesel in the construction sector. On the other hand, LPG in India, followed by middle distillates in other countries in the region, will be the products leading oil demand in the region.
In 2018, better development in economic conditions y-o-y combined with the low base line of comparison should act as positive factors to oil demand growth in India in 2018.
In 2017 and 2018, Other Asian’s oil demand growth is anticipated to rise at a healthy rate, supported by improvements in economic growth, coupled with steady developments in the petrochemical sector and encouraging rises in vehicle sales.
Within the region, India is seen to be the largest contributor to growth and countries such as Indonesia, Thailand, Singapore and the Philippines are also projected to contribute positively to oil demand growth in 2018.
In terms of products, light distillates – which include LPG, naphtha and gasoline – will lead oil demand growth next year.
In Taiwan, latest available data for the month of August indicates increasing oil requirements by 61 tb/d, or 6%, y-o-y. Most of this y-o-y rise was a result of rising naphtha requirements for the petrochemical sector followed by fuel oil and jet fuel, highlighting an improvement in the industrial and aviation sectors.
In Indonesia, positive oil demand growth in August stemmed from increasing demand for fuel oil, naphtha and diesel oil, hinting at an improvement in industrial fuel and petrochemical feedstock requirements. In August, Indonesia consumed around 1.72 mb/d of oil products, 22 tb/d higher from the same month a year earlier.
Other Asia’s oil demand is projected to grow at a rate of 0.28 mb/d in 2017. As for 2018, oil demand is forecast to grow once more solidly at 0.36 mb/d.
In Saudi Arabia, September 2017 oil demand flipped into positive territory to grow by 0.29 tb/d, or 11%, y-o-y, and stand at 2.81 mb/d. However, the picture remained negative on a cumulative basis, with data from January – September suggesting a decline of about 28 tb/d, or 1%, y-o-y. Looking at the product categories shows a mixed performance, with direct crude oil for the purpose of power generation, fuel oil, gasoline and jet/kerosene recording positive gains, while diesel oil and LPG demand declined. Direct crude for burning increased by 0.17 mb/d, or 35%, y-o-y, to stand at 0.66 mb/d in September, on the back of expansion projects of the master gas system that supports industry and utilities, in addition to the low y-o-y base line of comparison. Moreover, jet/kerosene, gasoline and fuel oil improved at various magnitudes by 16%, 7% and 9% respectively, y-o-y. On the other hand, diesel oil declined by around 14% y-o-y as a result of less consumption in the transportation and industrial sectors.
Oil demand figures for the month of September 2017 in Iraq showed a slight improvement of 21 tb/d or 3% y-o-y, despite a mixed performance among product categories. While LPG, gasoline and fuel oil showed increases, naphtha and jet/kerosene declined.
Kuwait and UAE
Oil requirements also increased in Kuwait and the UAE by 3% and 2%, respectively, y-o-y as growth in the transportation fuels appeared to be the main source of support in both countries.
Going forward, expectations for the remainder of 2017 appear to be slightly tilted to the downside as the high level of substitution as well as slower economic indicators weigh on demand growth potential in the region.
In 2018, oil demand growth is expected to gain momentum over the levels experienced in the current year, mainly as a result of assumed improvements in the economy. On the other hand, geopolitical concerns as well as a high level of substitution are assumed to contribute negatively to demand growth in 2018.
For 2017, Middle East oil demand is expected to rise by 96 tb/d, while oil demand in 2018 is projected to increase by similar levels to 2017.
Brazilian oil demand grew for the fifth consecutive month in September 2017, albeit at a lower rate than in previous months. Oil demand data indicates an increase of 18 tb/d y-o-y, to reach 2.70 mb/d of total product demand. The slower growth is attributed to declining gasoline requirements as the product decreased for the first time since January 2016.
Retail gasoline prices have increased during September 2017, reaching BRL 3.88 per litre and reducing the competitiveness to ethanol, which recorded retail prices at around BRL 2.63 per litre during the same month. Gasoline demand shed around 18 tb/d, or 2% y-o-y, while ethanol consumption also declined, but by a mere 6 tb/d, a much lower rate than the average decline during 2017 of 50 tb/d. Diesel demand increased for the fifth consecutive month in September by 17 tb/d, or 2%, y-o-y. This rise is a result of improvements in the overall economy as growth in various sectors such as the transportation, agriculture, construction and industrial sectors have all contributed positively to this gain. Fuel oil demand increased the most during the month by around 26 tb/d y-o-y, chiefly to satisfy the additional demand in the power sector.
The expectations for 2017 Brazilian oil demand remain therefore unchanged since last month, with oil demand growth being dependent on the recovery of the country’s economy during the remaining part of the year.
Oil consumption in Argentina show marginal growth in August 2017, gaining some 10 tb/d, or 1%, y-o-y as all products recorded gains with the exception of diesel oil. All transportation fuels were in the positive with jet/kerosene, diesel oil and gasoline rising by around 17% and 1%, respectively, y-o-y. Fuel oil also registered notable growth, rising by 3% y-o-y. Total consumption reached 0.73 mb/d in August.
Looking forward, the risks for oil demand potential for the remainder of 2017 continued to be to the upside, as economic conditions in Brazil and other countries in the region are anticipated to improve as compared to the recent past. In 2018, projections are largely dependent on the foreseen improvement in the overall economy. Consequently, oil demand should improve, also given the relatively low base of this year. In terms of products, diesel oil and gasoline will have higher growth potential and are expected to fuel the industrial and transportation sectors.
Latin American oil demand is anticipated to decline by 47 tb/d in 2017. In 2018, oil demand growth is forecast at 85 tb/d.
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