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Friday, December 15, 2017

Oil demand increase figures projected for 2007 slipping

The Paris-based International Energy Agency (IEA) is again revising downward its projection for increased oil demand in 2006 (-0.1 mbd) and 2007 (-0.16 mbd). These are marginal changes, but indicate a weakening of the fundamentals. In fact the IEA and the U.S. Department of Energy/EIA and OPEC all have different projections for 2006/7.

 

Figures - mbd

2004

2005

2006

2007

World oil demand - IEA

82.48

83.59

84.68

86.22

Projection – IEA

 

1.11

1.09

1.54

Projection – OPEC

 

 

0.90

0.90

Projection – USDOE/EIA

 

 

1.20

1.70

 

The increases in 2007 will mainly take place in the U.S. (+0.4 mbd), the Middle East (+0.3 mbd), and Asia (+0.6 mbd). The increase in oil demand in the U.S. may be balanced by recovered domestic oil production. Middle East oil production will not create a great deal of increased tanker demand, so the tanker market will therefore be dependent on increased oil demand in China and the rest of Asia. 

 

This increase of 0.6 mbd in Asian oil demand will, however, only occupy some 13 VLCCs, less than half the increase expected in tonnage in this segment – there are 34 deliveries anticipated, plus some conversions expected - at least one 1989-built single hulled VLCC is reported to be under conversion to double hull. In addition, in 2008 38 VLCCs will be delivered and in 2009 more than 50, whereas only 4 are to be phased out during these years

 

Click here for link to projected VLCC fleet development and here for projected tanker fleet development.

 

There is some expectation that China will take more long haul crude from West Africa next year - this trade can be done in combination with backhaul from LOOP with the combination of trade providing an effective increase in timecharter equivalent of 37%.

 

In addition, employment will also need to be found for other newbuildings - for the 27 suezmaxes, 52 aframaxes and 44 panamaxes that are entering the market. Phase-out in 2007 is projected to be 1 suezmax, 24 aframaxes, 10 panamaxes -and 1 VLCC.  In 2008 38 VLCCs will be delivered and in 2009 more than 50, whereas only 4 are to be phased out these years.

 

Refinery development will also change the trade patterns for tankers. India is increasing products exports due to refinery expansions. When the new Jamnagar refinery comes on stream in 2008, India will increase crude imports by almost 0.5 mbd and increase product exports by almost the equivalent. However this could actually reduce overall crude tanker demand - it will only require some 3 VLCCs to take care of this trade from the Middle East to Jamnagar; but for example the US could import more oil products from India but less crude oil from the Middle East. 

 

Russia is also exporting more products at the expense of crude oil:

 

FSU petroleum export – mbd – Source IEA

Area – crude oil export

2003

2004

2005

Jan-Jul 06

Black Sea

2.21

2.2

2.27

2.26

Baltic Sea

1.06

1.51

1.59

1.63

Artic/FarEast

0.21

0.25

0.19

0.11

Seaborne

3.47

3.96

4.05

4.03

Druzba Pipeline

1.07

1.1

1.15

1.19

Other Routes

0.17

0.23

0.25

0.35

Total crude exports

4.71

5.29

5.45

5.57

of which Transneft

0.85

3.76

4.2

4.34

Products:

 

 

 

 

Fuel oil

0.83

0.9

0.93

0.95

Gasoil

0.82

0.84

0.87

0.97

Other Products

0.41

0.46

0.58

0.65

Products

2.05

2.19

2.38

2.57

Total Exports

7.76

7.48

7.83

8.14

Imports

0.02

0.01

0.02

0.02

Net Exports

7.74

7.47

7.81

8.12

 

South Korea is also increasing oil product exports which could benefit both the product and the crude oil trades as South Korea takes most of its crude oil from the Middle East.

 

The big change will, however, come when the big export refineries will be completed in 2009/10 in Saudi Arabia.  There is little doubt that these will benefit the product tanker market at the expense of the crude oil tanker market.

 

It is the product trade that has increased the most over the last couple of years. Using the trade tables from BP’s oil reviews, we see that the product trade increased by 7.2% in 2004 and 9.65 in 2005.  Future refinery projects in India and the Middle East may mean that this trend will continue, even if the trend were to some extent to level out in 2006/07 and then recover in 2008-10.

 

Oil product trade/export and import –
million tones: Source BP

Year

Products

Products increase

Crude

Crude increase

1999

447.6

 

1,578.1

 

2000

450.2

0.6%

1,660.7

5.2%

2001

475.3

5.6%

1,684.0

1.4%

2002

485.9

2.2%

1,666.7

-1.0%

2003

490.5

1.0%

1,770.0

6.2%

2004

525.8

7.2%

1,854.9

4.8%

2005

576.3

9.6%

1,885.2

1.6%

Source: BP

 

Clearly the biggest import areas in 2005 were Europe (525 m ts), the U.S. (501 m ts), and Japan (210 m ts). There are no new big refinery projects in these areas. The biggest export areas in 2005 were the Middle East (120 m ts), the FSU (81 m ts), Europe (66 m ts), and SC America (64 m ts).

 

Contact: Erik Ranheim