Global oil demand will grow 1 million b/d in 2014, or about 300,000 b/d more than the IEA’s latest forecast, according to ESAI Energy’s recently published Global Fuels Outlook. The report highlights discrepancies between ESAI Energy’s and the IEA’s forecasts for demand growth and provides an outlook on petroleum product markets—and spreads to crude—through 2016.

There has been plenty of bearish talk about petroleum product demand lately, ESAI Energy notes. Publication of the IMF’s October World Economic Outlook attracted a lot of attention for downward revisions to economic growth, especially for 2014, which is forecast at 3.3 per-cent (the same as the two previous years). Similarly, the IEA’s monthly Oil Market Report has made steady downward revisions to its 2014 demand expectations, most recently lowering global oil demand to just 700,000 b/d, partly due to weak year-on-year demand growth in the fourth quarter. The IEA also revised down 2015 demand growth to 1.1 million b/d.

In Global Fuels Outlook, ESAI Energy maintains that global oil demand growth should be rough-ly 1 million b/d this year. And in 2015 and 2016, demand should increase by another 1.2 mil-lion b/d each year, according to the report. Among other things, ESAI Energy data and fore-casts paint a less bearish picture of refined product demand growth in China. The report finds that Chinese LPG and gasoline demand are on track to grow 120,000 b/d and 210,000 b/d, re-spectively, this year, or a combined 150,000 b/d more than the IEA forecast for those two fuels. The IEA also predicts a decrease in China’s diesel demand in 2014, when ESAI Energy ex-pects demand to be essentially flat relative to 2013. This is also the year-to-date trend in Chi-na’s diesel demand.

“We think product demand growth will not decelerate in the fourth quarter, and that year-on-year stability in late 2014 will form the basis for more robust demand growth in 2015,” says ESAI Energy’s John Galante. “Weak underlying crude prices will also help drive demand growth in the years ahead.”

In terms of prices, especially for products like diesel and jet fuel, ESAI Energy believes its rela-tively robust global demand picture will offset some of the bearish pressure on spreads that is coming from big additions to supply. According to Mr. Galante, “Fundamentals are not weak-ening so drastically that the bottom will fall out of margins during the next two years.”
Source: ESAI Energy