Mideast oil demand outlook remains positive for 2018-19

DOHA: The outlook for 2018 and 2019 Middle East oil demand is positive, with risks skewed to the downside. Some factors that may curb oil demand in the region during 2018 and 2019 are domestic petroleum product retail prices, fuel substitution, as well as developments in the economies of the region’s main oil consumers.

For 2018, Middle East oil demand is forecast to grow by 0.02 mb/d, while oil demand in 2019 is projected to increase by 0.08 mb/d, according to Opec.

World oil demand is anticipated to increase by 1.64 mb/d in 2018, revised down by 20 tb/d as compared to last month’s oil market report. World oil demand is now projected to average 98.83 mb/d.

Oil demand growth in the OECD region was revised higher by 50 tb/d in 1Q18 and 10 tb/d in 2Q18, mainly as a result of a continued better-than-expected performance from the petrochemical and industrial sectors in the US, Opec’s oil report for the month of August noted.

A downward revision of 40 tb/d in the OECD Asia Pacific region in 2Q18 resulted from lower heavy fuel demand in Japan. In the non-OECD region, oil demand growth saw some upward adjustments in 1Q18, while 2Q18 was revised down by 0.14 mb/d.

Weaker-than-expected data from the Middle East and Latin America on the back of fuel substitution, subsidy reduction policies as well as slower overall industrial activities impacted oil demand data negatively, mostly in 2Q18. On the other hand, positive economic momentum in the Other Asia region, including India, supported a positive upward revision in the region.

For 2019, world oil demand growth is expected at 1.43 mb/d, a downward revision of 20 tb/d from last month’s projection. Within the OECD region, growth is projected to originate from OECD Americas with the total OECD region expected to add around 0.27 mb/d of potential oil demand growth in 2019.

In the non-OECD region, oil demand growth is anticipated to improve in Latin America and the Middle East from the levels seen in 2018, despite minor downward adjustments as compared to last month’s assessment to now stand at 1.16 mb/d in 2019. China and India are forecast to see the highest growth levels among the non-OECD countries in 2019.

Preliminary June 2018 data implies that Japanese oil demand shrank sharply by almost 0.3 mb/d y-o-y. This marks the fourth consecutive month of declines in 2018 and follows continuing losses for each month last year.

The latest available Korean data for May 2018 indicates a solid oil demand increase of 0.1 mb/d compared with the same month last year, with demand for some of the main petroleum product categories increasing, particularly those used in the country’s petrochemical sector – naphtha and LPG, as well as jet/kerosene.

Furthermore, gas/diesel oil, gasoline and residual fuel oil demand fell during May 2018, y-o-y, partly offsetting overall gains.

The outlook for South Korean oil demand during 2018 and 2019 remains positive with further upside potential compared with last month’s projections, mainly due the country’s growing petrochemical industry.

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