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Wednesday, November 14, 2018

Weaker OECD oil demand – stronger non-OECD oil demand

The latest short-term forecast from the Energy Information Administration (EIA) is not good news for the tanker market.  Not only is the increase in U.S. oil demand projected to be modest, but part of the increase in demand is projected to be met by increased domestic oil production.


Total U.S. domestic petroleum consumption is projected to average 20.8 million barrels per day (mbd) in 2007, up 0.5% from the 2006 average, with a further 1% increase, to an average of 21.0 mbd, in 2008.   In 2007 U.S. domestic crude oil production is projected to average 5.1 mbd, 0.7% higher than 2006 production levels.  Domestic production is projected to increase in 2008 by 2.3 percent, to an average of 5.3 mbd.  Contributing to the production increases are the Atlantis deepwater platform, which is expected to come on-stream later this year, and the Thunderhorse platform, expected to come on-stream late in 2008. 


U.S. motor gasoline inventories throughout this summer were tight and are expected to remain so during the rest of the year.  On September 30, total motor gasoline inventories were estimated to be 192 million barrels, 12 million barrels below the average for the last 5 years.  At the beginning of the second quarter next year, total inventories are expected to be 205 million barrels, 2 million barrels below the 5-year average.


On the global front, the  Paris-based International Energy Agency (IEA) expects OECD demand to increase by 0.2% in 2007 to 49.3 mbd, and by 1.5% in 2008 to 50.1 mbd. This outlook continues to be based on prevailing economic forecasts from the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD), slightly adjusted for some countries based on the median from international economic survey organisation Consensus Economics’ surveys, and on normal weather conditions during the coming winter. The forthcoming assessments from these international institutions will shed more light on the consequences of the U.S. sub-prime crisis.


Non-OECD oil product demand has been adjusted upwards in both 2007 and 2008 (+0.055 mbd and +0.087 mbd, respectively), largely due to changes in the Former Soviet Union (FSU) baseline. The changes are mostly related to an historical reappraisal of NGL supply in the FSU, which, along with net exports data, constitute the  basis of the region’s apparent demand calculation. Overall, non-OECD demand is seen reaching 36.6 mbd in 2007 (+3.2% on an annual basis) and 37.9 mbd in 2008 (+3.7%). This forecast continues to assume that sub-prime woes are unlikely to spill over into China and the Middle East, which together account for over a half of worldwide oil demand growth.


Contact: Erik Ranheim