The latest Global Energy Weekly report from Bank of America Merrill Lynch points to an additional 1.5 million barrels a day in 2018
So, what are the numbers?
Global oil demand growth will likely expand at a rate of 1.47 million barrels a day (bpd) in 2018, which compares to an average growth rate of 1.18 million bpd in the 2015-17 period. Partly, this is driven by cheaper oil in the recent timeframe, down to an average of $55.5 per barrel in the 2015-19 window.
So who is buying more?
The global recovery in oil demand is broad-based, with the principal OECD countries in Europe, North America and North East Asia showing economic expansion – and that means more consumption, even accounting for recent price rises. But in reality 90 percent of global oil consumption growth will be driven by emerging markets.
Consumption growth will be 1.4 million bpd this year and that is based on strong demand for a wide range of petroleum products. In India alone – where oil requirement rose 10.3 percent in the first month of 2018 – demand will expand by 270,000 bpd in 2018 compared to just 120,000 last year, driven by strong car sales and need for transportation.
Which sectors are driving the increase?
To some extent, the robust growth can be linked to rising car sales, with global automotive purchases increasing by 2.1 percent (or a very healthy two million units) this year. Transportation, and in particular passenger and freight air travel, is also on the increase; jet fuel demand accounts for seven million bpd globally and it is a core driver of the middle distillate complex. Global passenger air traffic is currently at an annual rate of five percent.
What about China?
China’s oil demand will expand by 430,000 bpd on average in 2018 but is on a decelerating path. The reasons include tightening monetary conditions, and that is already being seen to affect car sales, while power, cement and steel sectors have seen sizeable deceleration in the past months.
Also, any further moves towards protectionism could set Chinese oil demand growth at risk over the next few quarters. In particular, some of the recent trade measures by the Trump administration targeting aluminium and steel, as well as additional measures targeting other Chinese exports, could have a negative effect in the medium term.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.