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Tuesday, November 13, 2018

IEA points to slowing oil demand growth – but still 1.75m b/d

The last report from the International Energy Agency (IEA) indicates a lower increase demand for tankers in 2005 and 2006. Overall increase in oil demand is slowing down this year, but is expected to pick up again to 1.75 mbd in 2006 compared to 1.6 mbd in 2005 – though still well down on the stunning 2.9 mbd for 2004. Call on OPEC crude oil (+ stock change) is projected to be 28.1 mbd in 2006, the same as in 2005 – and higher then the 27.9 mbd in 2004.

Demand in all the various consumption areas is forecast to slow down. In North America demand increased by 0.83 (3.5%) mbd in 2004, but will slow down to 0.26 mbd growth this year and 0.33 mbd in 2006. Demand in Europe increased by 0.15 mbd (1.0%) in 2004, but will slow down to 0.04 mbd growth this year and 0.01 mbd in 2006.

China will represent the largest increase in demand, with a 0.49 mbd (7.2%) increase in 2006 compared to 0.86 mbd in 2004 and 0.36 mbd in 2005. “Other Asia” represents the second biggest increase in consumption in 2006 of 5.1% or 0.27 mbd.

The increase in demand of 0.31 mbd in the Middle East for 2006 may appear not to affect the tanker market, but this area appears to lack sufficient refinery capacity for gasoline which means that increased demand means increased oil product imports too.

On the supply side we see that Canada is projected to increase oil production by 0.23 mbd in 2006, which compensates for marginal declines in the U.S. and Mexico.

Oil production in the North Sea is sliding in the U.K. sector, and total European oil production is expected to decline by 0.21 mbd in 2005 and 0.16 mbd in 2006, to 5.69 mbd.

On the other hand, Latin America will increase oil production both this year by 0.23 mbd and in 2006 by 0.23 mbd to 4.53 mbd in 2006.

Africa (ex. OPEC Nigeria, Libya and Algeria) will also increase oil production both this year by 0.33 mbd and in 2006 by 0.54 mbd to 4.3 mbd in 2006.

Looking at the total non-OPEC increase in supply, the figure is expected to be 1.4 mbd out of of the 1.75 mbd increase in world oil demand. Oil production is the Former Soviet Union is projected to increase both this year by 0.41 mbd and in 2006 by 0.59 mbd to 12.22 mbd in 2006.

Also worthy of note is the 0.8 mbd stock building in 2004 in contrast with the stock reduction of 0.2 mbd 1Q05 and the stock building of 2.7 mbd 2Q05.

Contact: Erik Ranheim