Global crude oil demand to rise by 90,000 barrels per day
The International Energy Agency (IEA) Oil Market Report for April has raised its forecast of 2015 global oil demand by 90 000 barrels per day (90 kbpd) to 93.6 million barrels per day (mbpd), a gain of 1.1 mbpd on the year, informing subscribers that the notable acceleration from 2014’s 0.7 mbpd growth builds on cold first-quarter temperatures and a steadily improving global economic backdrop.
In the report, global supply rose by an estimated one mbpd during March, to 95.2 mbpd, as OPEC production recorded its highest monthly increase in nearly four years. “Year-on-year gains totalling a whopping 3.5 mbpd were split between OPEC and non-OPEC production.
“OPEC crude oil output soared by 890 kbpd in March, to 31.02 mbpd, on sharply higher Saudi Arabian, Iraqi and Libyan supplies. The OMR “call on OPEC crude and stock change” was revised marginally higher for the current quarter, to 30.35 mbpd, above the group’s official production ceiling, but left unchanged for full 2015 from the March Report, at 29.5 mbpd”, it said.
Global refinery crude demand is expected to fall seasonally to 77.3 mbpd in the current quarter, from 78 mbpd in the first quarter of the year.
While Atlantic Basin refiners mostly completed turnarounds in the last quarter, Asian refinery maintenance is set to ramp up sharply this quarter, with up to 2.5 mbpd of distillation capacity offline at its peak in May.
It stated: “Given deep changes in supply and demand in recent years, the way lower prices impact the market is also different from previous price corrections.
That too is causing uncertainties, and not just about the response of unconventional North American supply to lower prices. The demand response has taken the market by surprise.
Unexpected pockets of demand strength have emerged. Should those be seen as a sign that the demand response to lower prices will prove more robust than expected, or rather as a temporary aberration that will lead back to renewed weakness later on? “Unexpected demand strength in crude and product markets has boosted refining margins in some of the very markets where demand had seemed to be the weakest.
European product demand, long in secular decline, swung back to growth in some markets in early 2015, and the region’s refining sector has found renewed vigour amid weaker-than-expected runs elsewhere.
Previously tepid Indian demand has strengthened, as lower oil prices appear to offer further support to an already improving economic outlook.
US transport fuel demand has surged in the last few months. Not all readings are positive, however. Some preliminary bullish data, such as US demand estimates for January, have been revised downwards.
Statistics on global oil demand remain extremely patchy in any event, with few measurements of non-OECD demand so far this year. “Not all of the apparent pockets of demand strength may be sustainable.
At least some product buying has been meeting storage demand. In China, in particular, product stocks have surged in early 2015, while implied crude builds have also remained strong. European product cover is rising, bucking seasonal trends, on high refinery output.
High OECD demand for middle distillates and LPG in early 2015 was largely driven by cold weather, a temporary factor if there ever was one. High deliveries might also reflect in part price-opportunistic product buying – in effect borrowed demand, leading to weaker growth later on.
In several large producer countries, such as Brazil and Nigeria, demand is reeling from the effects of lower oil revenues and other factors. Meanwhile, seasonal refinery maintenance in Asia is about to remove one of the crude market’s biggest props.
“On the supply front, considerable uncertainty remains about the ultimate outcome of the talks between Tehran and world powers and the timing of a potential lifting of sanctions.
But an increase in Iranian exports has become a real possibility”. As noted in this Report, while it may take some time for Iran to expand its production capacity, ramping up flows from already developed fields could be faster. Even quicker would be a hike in exports from oil in floating storage, of which there is reportedly enough to sustain shipments of some 180 kb/d for six months”.
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