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Oil Demand Forecast Scenarios

Source: OPEC 8/7/2012, Location: Europe

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.

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