Recession Taking Its Toll on World Oil Demand

The slowing global economy is taking a large toll on oil demand. The International Energy Agency is now assuming a halving of economic growth to 1.2%.

Combined with a lower 4Q08 demand baseline, this has dramatic implications for our 2009 oil demand forecast, which now stands at 85.3 mb/d, down by 1.0 mb/d from last month, and a contraction of 0.5 mb/d from 2008 (itself some 0.3 mb/d lower than 2007).

OECD 2009 demand is cut by 0.5 mb/d (declining by 1.2 mb/d vs 2008), and the Chinese outlook is cut by 0.3 mb/d, suggesting 2009 growth of less than 0.1 mb/d.

Other Highlights of the IEA’s latest Oil Market Report:

• Global oil supply was flat in December at 86.2 mb/d, with curbed OPEC output offset by gains elsewhere. Non‐OPEC supply for 2008 and 2009 is forecast at 49.5 mb/d and 50.0 mb/d, lowered by 60 kb/d and 30 kb/d versus last month’s report. 2008 output declined by 150 kb/d, partly due to the first fall in Russian supply since 1996. 2009 growth is forecast at 0.5 mb/d, in addition to a 0.6 mb/d increment in OPEC NGLs.
• December OPEC crude supply was 30.9 mb/d, down 330 kb/d versus November. This was 1 mb/d below September 2008 levels, and nearly 2 mb/d below mid‐2008 highs. OPEC agreed a new target of 24.8 mb/d from January, equivalent to OPEC‐13 output of 28.2 mb/d versus a reduced 2009 ‘call’ of 29.5‐30.0 mb/d.
• 1Q09 global refinery throughput is forecast at 72.3 mb/d, 1.2 mb/d lower than last month’s report. Weaker global demand and poor economics continue to hamper crude runs. Evidence of more structural changes to the refining industry is emerging in addition to reduced plant operation rates.
• OECD industry stocks fell by 2.0 mb to 2,658 mb in November, as a US build was offset by lower European crude and Pacific distillates. Despite a downward revision to October data, end‐November forward demand cover remains high at 56.4 days on lower OECD demand. Preliminary December data indicate an OECD draw of 8.0 mb.

Comments

[ROLEX18]

I love recession, I thrive on it.

2009 Feb 12 01:09 PM

[mac.barron]

I don't love the recession. I don't think that the current conditions are optimal for making money; it can be done but it is a lot simpler and less risky when times are good. All things considered I'd rather see a market where there is increased global productivity with sufficient surpluses to fund clean energy and try to bring the benefits of the free market to more of the world's population.

2009 Feb 12 02:26 PM

[Ferdinand E. Banks]

A valuable note. This is the kind of information that we need, and it is well presented.

2009 Feb 13 09:25 AM

[Dave Wrixon]

If you look at the price differential between West Texas and Brent, it is not difficult to see where demand is stalling fastest. It was over 12 dollars at last week. West Texas used to be at $2 premium!

It is just not possible to reconcile the picture of falling demand from the USA for both Manufactures and Commodities with the still very rosy official picture of the economy. Half the World is in recession because the US has stopped importing manufactures but from the import of oil we can see that US industry is just about on stop. Even if the US consumer was spending at half the rate they are supposed to be the shelves would have been bare months ago.

2009 Feb 14 09:02 AM