Global oil demand may exceed IEA forecast: Saudis may hold the high card.


Global oil demand will grow 1 MMbpd in 2014, or about 300,000 bpd 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 noted. Publication of the IMF's October World Economic Outlook attracted considerable attention for downward revisions to economic growth, especially for 2014, which is forecast at 3.3% (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 bpd, partly due to weak year-on-year demand growth in the fourth quarter. The IEA also revised down 2015 demand growth to 1.1 MMbpd.

In Global Fuels Outlook, ESAI Energy maintains that global oil demand growth should be roughly 1 MMbpd this year. And in 2015 and 2016, demand should increase by another 1.2 MMbpd each year, according to the report. ESAI Energy data and forecasts 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 bpd and 210,000 bpd, respectively, this year, or a combined 150,000 bpd more than the IEA forecast for those two fuels.

The IEA is also predicting a decrease in China's diesel demand in 2014, when ESAI Energy expects demand to be essentially flat relative to 2013. This is also the year-to-date trend in China's diesel demand.

West Texas Intermediate crude futures are little changed this year as signs of economic recovery in the United States, the world's largest oil user, counter slowing growth in emerging nations. Manufacturing and jobs growth in the world's biggest economy surpassed forecasts in February, government data showed earlier this month.

The increase in global consumption will require a higher average level of crude this year from the Organization of Petroleum Exporting Countries (OPEC) than previously expected, according to the IEA. OPEC, responsible for about 40% of world oil supplies, will need to provide 29.7 MMbpd in 2014, or about 100,000 bpd more than anticipated in September. That's 800,000 bpd less than the production in February.


OPEC's 12 members boosted output by 500,000 bpd to 30.49 MMbpd in February led by a surge in Iraqi exports, which pushed OPEC's production above its 30-million barrel ceiling for the first time in five months. Iraq's production climbed by 530,000 bpd to 3.62 MMbpd, the most since 1979, while Saudi Arabia's rose 90,000 bpd to 9.85 MMbpd.

Though expansion in demand next year will be...

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