2012 Oil Demand Outlook Lowered

OPEC cut its 2012 forecast of worldwide oil demand earlier

Global oil demand in 2012 is expected to grow by 800,000 b/d from 2011, down from last month’s outlook for 1.1 million b/d of demand growth, according to the latest monthly oil market report from the International Energy Agency.
The report follows this month’s outlook from the Organization of Petroleum Exporting Countries, which cut its 2012 forecast of worldwide oil demand by 120,000 b/d to 900,000 b/d of growth from 2011.

The Paris-based IEA now expects demand to average 89.9 million b/d this year, as the International Monetary Fund cut its forecast of the economic growth rate that underpins the worldwide oil demand outlook to 3.3% from the 4% outlook that had been assumed since September 2011. The IMF expects a contraction in 2012 economic activity in the Euro zone countries.

IEA still sees robust oil demand growth of 1.2 million b/d in the developing countries outside the Organization for Economic Cooperation and Development (OECD)—although this compares to last month’s outlook for 1.4 million b/d of growth. And the agency expects OECD demand to average 45.25 million b/d this year, down from a 2011 average of 45.64 million b/d, as sliding gasoline demand accounts for more than 40% of this decline.

US demand is forecast to average 18.8 million b/d, down from last year’s 18.89 million b/d, while Canadian demand is seen slipping to 2.21 million b/d from 2.23 million b/d.

Oil demand in China this year is forecast to climb to 9.89 million b/d from last year’s average of 9.51 million b/d, curtailed a bit due to weaker economic growth of 8.2% this year vs. a previous outlook of 9%.

Outside the OECD, IEA says, the industrially important gasoil market will provide 400,000 b/d of the projected gain in oil demand for 2012, as economic growth in these emerging and developing countries averages 5.4%.

OECD oil supply for 2012, forecast to average 19.4 million b/d, is up marginally from IEA’s previous report, with a higher expectation for US production and a small decrease in the outlook for Canadian output. Non-OECD oil production is forecast to average 30 million b/d, up from the 2011 average of 29.8 million b/d. Processing gains and biofuels will add another 4.2 million b/d to this year’s oil supply.

The ‘call on OPEC crude and stock change’ is reduced by 100,000 b/d for both the first half of 2012 and the year as a whole. At 29.9 million b/d, the 2012 ‘call’ is 700,000 b/d below the 2011 average due to a combination of higher non‐OPEC supply and OPEC NGLs, which the agency forecasts will average 6.3 million b/d this year vs. last year’s 5.8 million b/d. IEA estimates that OPEC’s effective spare capacity is 2.82 million b/d, largely unchanged from last month.

IEA said that in addition to supply and demand, the widening of Brent crude oil’s premium to West Texas Intermediate plus midstream and downstream developments are key to explaining oil price dynamics.

Far East 4 There are multiple factors behind the renewed widening in the price differential, recently about $19/bbl, and a shortage of pipeline capacity to move crude to US Gulf Coast refineries from the Midwest is central to the issue.
“An added twist is the deferral of the Keystone XL pipeline project, even though that decision will arguably prompt development of alternative routes to the US Gulf or, longer term, push Canadian crude towards the Pacific Coast. In a global context, strong relative Brent prices would normally confine Atlantic Basin crudes within the region. However, Japanese power sector oil demand, after nuclear capacity shutdowns, is strengthening Asian fuel oil prices, and so too heavier Middle East crude prices. An arbitrage for Brent‐linked African crudes into Asia has therefore opened,” IEA said.

IEA also noted that incremental midstream demand, for example, to fill new strategic storage capacity in China, could pull upwards of 200,000 b/d of extra crude into Asian markets, over and above rising regional products demand and refinery runs.

Also, the apparent paradox of weakening European 2012 oil demand but strengthening refining margins looks less puzzling when recent refinery rationalization is taken into account, IEA said. A spate of actual and threatened closures—from Petroplus plants in Europe through to major export‐oriented units in the Caribbean plus a late‐winter freeze in Europe and Asia—have driven products cracks sharply higher, despite an increasingly gloomy economic picture.

Research additional information:
Oil Prices Strengthen; Goldman Sachs See $45 by October Oil prices strengthened in recent trading sessions on a decline in U.S. oil inventory levels and better economic numbers from China, world’s second-...
WTI Crude Oil Price Rose On Middle East Tensions, Expectations of a Tighter Futu... · WTI crude oil price increased by 18.41% to $58.16 per barrel · Disappointing US economic growth; Euro-zone continues recovery · Total oil deman...
Shell Still Optimistic about Oil Price Royal Dutch Shell PLC (RDSA) remains optimistic about the future of the oil price, despite its dramatic slump in recent months, Chairman Jorma Ollila ...
Saudi Arabia Continues To Turn Screws On U.S. Shale Saudi Arabia continues to ratchet up production, taking market share away from U.S. shale producers. According to OPEC's latest monthly oil report,...
Oil Price Fall Reflect on UAE Job Market 2015 salary projections for the United Arab Emirates had to be recently revised and readjusted. As a result, salary hikes in the country are now pre...
Oil Prices Make a Comeback; Now Buy Property in Dubai Crude-oil futures rallied well above $50 a barrel to settle at their highest levels of 2015 on Tuesday. Some analysts believe that oil prices bottomed...
Low oil prices is an opportunity for GCC economies to reinvent themselves Dramatic drop in oil prices is a game changer for the macro outlook for 2015 ‘Too low’ oil prices adds to the picture of rising global instab...
Oil Plunge Drove GCC Stock Markets Further South On Tuesday, Gulf stocks fell for the eight day in the longest losing streak since 2011, with Dubai’s and Saudi stock markets closing at their lowest...
UAE Most Attractive for Oil & Gas Contractors The United Arab Emirates has become a central hub of the oil and gas industry in the region, according to a new study. Although the country produces m...
North American, European Oil and Petrochemical Companies Show Keen Interest in J... The participation of Jebel Ali Free Zone (Jafza), the flagship free zone business of Dubai, in Abu Dhabi International Petroleum Exhibition (ADIPEC), ...