World oil demand growth exceeded 1.40 mb/d for the third consecutive year to register an increase of 1.6 mb/d in 2017. Total global demand is now near the 97.0 mb/d threshold. Cumulatively, between 2015 and 2017, the world has added around 5 mb/d of demand for oil products on the back of healthy economic conditions globally and a relatively steady product price environment.
OECD Americas’ oil demand grew by a healthy 0.23 mb/d in 2017, driven by the solid economic momentum which supported light and middle distillate consumption.
In OECD Europe and Asia Pacific, following stable growth in the past two years, oil demand remained in positive territory in 2017, collectively rising by 0.23 mb/d. Improvements in the economy, healthy petrochemical and transportation sectors, and colderthan-normal temperatures earlier in the year lent support to oil demand growth.
In non-OECD, China’s oil demand growth was robust in 2017, increasing by nearly 0.5 mb/d as the petrochemical and the transportation sectors continued to expand at a healthy pace.
Oil demand growth in Other Asia – primarily India– increased by 0.23 mb/d, this is despite slower-thanexpected
oil demand growth from India in 1Q17, post demonetisation. Meanwhile, Latin America and
Middle East oil demand growth flipped into positive territory in 2017, with the two regions adding a combined
0.13 mb/d, on the back of an uptick in economic conditions in Brazil, along with firm growth in some
countries in Middle East (Graph 1).
For 2018, the major assumptions accounted for in the oil demand forecast include: a steady rise in global economic activities, which are projected to increase by 3.8% y-o-y; transportation fuels – namely gasoline, jet fuel and diesel oil – are anticipated to provide the bulk of growth in 2018, propelled by steady vehicle sales in the US, China and India; and capacity additions as well as expansions in petrochemical sector projects, which are expected to provide support to light distillates requirements, mainly in the US, and to a lesser extent in China (Graph 2).
Conversely, oil demand is assumed to be limited by a number of factors, namely: the level of substitution with other fuels in OECD Americas, Asia Pacific, and the Middle East; a steady increase in efficiency gains, and a reduction in subsidies, which are anticipated to reduce oil demand in the Middle East, but mitigated by higher household income. Finally, the degree of digitalization and technological development in various sectors is also expected to relatively cap oil demand growth in 2018.
As a result, oil demand in 2018 is projected to grow by 1.59 mb/d, broadly to reach 98.6 mb/d. The OECD is foreseen to rise by around 0.32 mb/d, with OECD Americas and Europe being firmly in the positive, while OECD Asia Pacific is anticipated to decline. In the non-OECD region, growth is forecast at 1.26 mb/d, with China being the major contributing country to overall growth, followed by Other Asia, including India.
Recently, healthy and steady economic development in major global oil demand centres was the key driver behind strong oil demand growth. This close linkage between economic growth and oil demand is foreseen to continue, at least for the short term.
Source: OPEC