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Saturday, September 22, 2018

Weakening oil demand

The (Paris-based) International Energy Agency (IEA) is carefully revising its oil demand figures downwards, although oil demand is still projected to increase by 0.8 mbd more than last year’s increase. However, considering the weakening of the world economy and record high oil prices, it is hard to see how that the final result can be as high as the current 1.72 mbd projection for 2008. Even Europe is projected to increase its oil demand, although the figure for Europe is revised downwards compared to last month's IEA report. 


It is important to note that the use of biofuels is expected to increase from zero at the turn of the century to some 0.7 mbd this year.


The tanker market will mainly be dependent on 0.836 mbd increased demand in Asia, of which China/Pacific represents about half the increase. It is jet fuel (+9.5% to 1.3 mbd) and diesel (+9.4% to 2.8 mbd) that are projected to increase the most in China in 2008, while the consumption of residual fuel is projected to decline by 4.1% to 0.7 mbd.


In the short term, increasing stocks will reduce the potential for tankers in the market.


The IEA projects that more than half of the demand increase will be supplied by non-OPEC countries. Expected non-OPEC supply growth in 2008 is 0.910 mbd, after a 2007 increment of 0.540 mbd (netting out the impact of Angola and Ecuador’s move into OPEC). Growth is weighted towards the second half of 2008, unlike 2007 when the first six months saw growth averaging 0.9 mbd, before subsequently slowing. Growth in 2008 is split between the Former Soviet Union (FSU), Asia, Latin America, and Africa as well as biofuels. On top of the non-OPEC totals, OPEC NGL supplies are projected to reach 5.2 mbd in 2008, an increase of 0.375 mbd over that of 2007.


Effective OPEC spare capacity stands at 2.2 mbd (net of Indonesia, Iraq, Nigeria and Venezuela – deemed likely to struggle to increase production in the short term). Saudi Arabia holds 1.74 mbd and the United Arab Emirates (UAE) 0.26 mbd. 

Contact: Erik Ranheim