Global oil demand could increase by as much as 2.3 million b/d this year, suggesting that the current sell-off in oil prices is overdone. While the recovery in jet fuel demand should amount to almost 1 million b/d, growth in gasoline demand is not too far behind at 800,000 b/d. China and India are making headlines, but the US is also one to watch.

The US is heading into the summer driving season with demand already at 9.2 million b/d. While nowhere close to pre-pandemic levels, demand is trending above a year ago.

The demand outlook for the summer is bullish. We do not expect gasoline prices to surge as they did last summer, with retail prices remaining below $4 per gallon on average instead of jumping to $5. Discretionary driving (ie, summer road trips) should be relatively strong. The US will thus support the global gasoline market, especially as its gasoline deficit will be deeper this year than last, and its gasoline inventories are low.

That being said, the global gasoline market is much more balanced this year than in 2022, with growth in supply more closely matched with demand. This was not the case last year when the refining system failed to keep up with the recovery in global demand.

Even so, we are not counting on additional volumes from Nigeria’s Dangote refinery or Mexico’s Olmeca refinery coming online in the near term. Despite Dangote’s commissioning in May and Olmeca’s announced operations in July, we expect that any material ramp-up in gasoline volumes will be delayed until the end of the year. Their impact will barely be felt in 2023.

But these delays mean the global gasoline market will look much weaker by 2024. The ramp-up of operations at these new refineries will occur just as growth in global demand decelerates, pressuring the gasoline market.
Source: ESAI Energy