Global crude oil demand is expected to grow by 1.04 mb/d in 2014 while consumption in non-OECD countries is likely to grow by 1.27 mb/d. The offsetting factor lies in the OECD, where demand growth is expected to decline by 0.23 mb/d, said London based Barclays in its recent market report.The bank forecasts Japanese oil demand to decline by 0.13 mb/d in 2014, as the country continues to replace oil as a source of power in its energy mix. The country is expected to start up 14 new gas and coal-fired power plants by the end of 2014 as it manages its energy requirements without nuclear power.

Gas-fired units alone are expected to add 5.2 GW of capacity (adding 7.8% over the 66.3 GW the power firms now operate on). Another element to factor in next year is the expected contraction in Japanese refinery capacity, the bank pointed.

Most notably, refiners Idemitsu Kosan and JX Nippon Oil & Energy have stated that they plan to mothball the 120 kb/d Tokuyama CDU and 180 kb/d Muroran CDU by the end of March 2014. Although utilisation can be picked up at remaining refinery units, the bank expects this is to reduce overall crude oil imports.

The only positive expected is from industrial use as a renewal could be spurred through the Abe government’s monetary easing, fiscal spending and a series of reforms that have been aimed at stimulating economic activity.

However, this will likely have to face the weight of structural factors (decreasing population, increased efficiency in fuel use and the gradual shift to alternative fuels).
Source: Barclays