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Global Oil Demand Growth Will Slow Significantly In 2017

OILytics profile picture


  • The market has ignored global oil demand as global oil supply continues to dominate headlines.
  • Current oil demand forecasts for 2017 is too high and does not take into account the strong dollar's effect on global retail prices.
  • We expect oil demand growth to be around 1mmbd in 2017, around 400,000bpd lower than current forecasts.
  • Any reduction in oil demand will make OPEC's job of rebalancing the oil market even harder than it currently is.

Over the last few months, the oil market has remained fixated on global oil supply. There have been several debates on OPEC vs Shale and the duration of OPEC production cuts.

However, global oil demand continues to receive very little attention despite it being the other half of global oil balances. Despite stable global GDP growth, we have seen oil demand growth flatlined as the world economy becomes less oil intensive due to efficiency improvements and pollution concerns in the developing world.

Source: EIA Short Term Energy Outlook

The consensus for 2017 oil demand from the 3 below agencies is at 1.36MMBD which is around 1.4% of global oil demand. Oil demand growth has been very stable since 2012 growing between 1.3-1.6% according to EIA. However, with the strong dollar, we might see a sharp reduction in the global oil demand growth which can make OPEC's job of rebalancing the oil market even harder. The current consensus for 2017 oil demand growth so far is:


EIA - 1.51MMBD


The dollar index touched a 14 year high recently and is still trading near those levels despite the recent drop. The strong dollar is putting significant pressure on retail prices paid by the consumer especially in the developing economies. We have looked at gasoline and diesel prices for 15 countries that contribute to around 50% of global oil demand. In the last 6 months, most of these countries have faced a significant increase in gasoline and diesel prices.

* Europe 5 = Germany, UK, France, Italy and Spain.

Source: IEA

Amongst the 15 countries that contribute to 50% of oil demand, the website globalpetrolprices.com track gasoline and diesel prices for all these countries apart from Saudi Arabia and Iran.

Source: globalpetrolprices.com

For the above 13 countries, on

This article was written by

OILytics profile picture
OILytics provides a free newsletter on the oil markets. We are an independent research consultancy focused on fundamental analysis covering the global oil markets. OILytics was previously known as Oil Unhedged and wrote 7 articles for Seeking Alpha.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (24)

Viking75 profile picture
I wonder what Oil unhedged thinks of his article written, 4 month ago. The USD has never been weaker in years and demand growth is being revised higher almoste every day.
tell me about it, uup is about to challenge 23.96 support. punch a hole and then cliff diving.
ValueAnalyst profile picture
I just hope that Oil Unhedged is hedged.
seems like oil consumption in asia (china and india) is very important to oil price.
Viking75 profile picture
Thanks. I am sure some publicly asked them the questions though. They can't deny the facts.
OILytics profile picture
Hello ValueAnalyst,
IEA today lowered their 2017 oil demand growth by 100KBD to 1.3MMBD as they see lower demand growth from India/China. It's only April, expect more downward revisions in the coming months.

ValueAnalyst profile picture
IEA did not lower its estimate by 100kbd. It revised it down by 40kbd, but people like yourself who pay zero attention to details hopelessly fall prey to IEA's frequent rounding games.

Keep an eye on 4Q16 and 2016 estimates when the tables become public in two weeks. I wouldn't be surprised if their 2017 estimate actually went UP despite the slight downward revision in the change from 2016 to 2017.
ValueAnalyst profile picture
Also - read this:

ValueAnalyst profile picture
As predicted, I am now told that 2016 demand estimate was revised up by 20kbd.

So your 100kbd revision all of a sudden became 20kbd.

Pay attention to details.
OILytics profile picture
We have had low oil prices since 2H 2014 and we haven't seen a big surge in global demand. The strong dollar is just one aspect which will negatively affect oil demand in some countries. Phasing out of fuel subsidies in some developing countries will lower their demand growth numbers compared to previous years.
ValueAnalyst profile picture
are you kidding? global oil demand surged +2.7 mbd from 3Q14 to 3Q15. The increase slowed down, but still remained healthy in 2016, due primarily to very severe YoY "tough comparison". I expect demand growth to pick up again in 2017; not to the 2+ mbd range, but close.

Here's the data for your reference: http://bit.ly/2iXu40g
OILytics profile picture
Thank you for reading my article. Even if we do get stronger GDP growth numbers, the oil intensity of global GDP growth is reducing as countries become more energy efficient. However, it's difficult to know how much of the increase in oil consumption due to global GDP growth will be offset by improved efficiencies.
ValueAnalyst profile picture
It's not the "global GDP growth" I am talking about, it is the "increase in global GDP growth" which can catch oil analysts off guard.

It seems that your reliance on yearly averages is misleading your analysis. For example, IEA significantly revised its global oil demand in 4Q16 over the last three months. It is now estimated that oil demand grew by an astonishing 2.2 mbd from 4Q15 to 4Q16, and I expect this to be revised higher even further in the next two months to +2.5 mbd. (source: http://bit.ly/2iXu40g ) And this happened in 2016, when global GDP growth was still muted. 2017 will be different.

Per my models, I expect anonther +2.0 mbd increase in 2017, driving global demand to exceed 100.0 mbd in 4Q17. Watch the headlines then...
east_reader profile picture
I don't agree the logic of the article either.
Strong dollar could affect the demand in some degree, however with the certain GDP growth, the key factor affecting demand is price instead of strong dollar. Low price will definitely increase the overall demand.
OILytics profile picture
Hi ValueAnalyst,
If you look at Q4'16 vs Q4'15, then some of the big y-o-y changes can be due to weather anomalies. A cold winter can skew these numbers. A yearly average smoothes out the global demand numbers and reduces the weather component.
ValueAnalyst profile picture
Thank you for looking at the supply/demand balance from a different perspective.

Having said that, however, I disagree with your analysis. I expect oil demand to surprise to the upside in 2017.

Specifically, if strong dollar were to negatively affect oil demand growth, this would first show up in global GDP growth projections, which are projected to increase in 2017 and 2018 vs. 2016 and prior years. This is expected as global growth has been slow in the last several years and the world is now moving onto the late-expansion stage of the business cycle.

"Global GDP growth is projected to pick up modestly to around 3½ per cent in 2018, from just under 3% in 2016, boosted by fiscal initiatives in the major economies."

john.fAIrplay profile picture
If current trends of increasing economic growth in various places around the world stall or reverse, it's possible oil demand growth could stall as well. Otherwise, current demand forecasts may be too low.
Viking75 profile picture
strong dollar??
OILytics profile picture
Yes, despite the recent drop the USD index still trades near multi-year highs.

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