Fuel demand in the GCC is expected to normalise in 2018 following a two year slump in consumption, according to a new forecast from BMI Research.
According to BMI, fuel consumption has been “slower to normalise” than initially anticipated, in part due to the pace and depth of subsidy reforms.
“However, broadly speaking, consumption declines appear to be softening and growth gathering pace,” the report notes. “From 2018 we forecast a normalisation of demand supported by a pick-up in economic activity in the region.”
BMI believes that the rate of growth, however, will “remain subdued” because of ongoing energy reforms and continued switching from oil to gas.
Diesel remains the most exposed to the downturn, particularly in Saudi Arabia, which BMI says “reflects a range of factors, including the deeper cuts to oil subsidies and the start-up of the Wasit gas plant displacing oil in the power sector.”
Demand outlooks were found to be mixed, with gasoline consumption in Saudi Arabia less impacted because of the availability of public transport alternative. Demand in Oman and Qatar, on the other hand, was found to be more elastic, with steep year-on-year declines. In most cases, according to BMI, gasoline demand has been faster to normalise than diesel and is trending upwards.
BMI notes that the outlook for 2018 “is significantly brighter” as recovering oil prices ease government fiscal constraints and improve consumer and investor confidence, and with an expected rebound in vehicle sales lifting demand for fuel.
Fuel demand, however, is not expected to return to pre-oil collapse levels, in part due to a push in a number of market to reduce the overall energy share in favour of gas.
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