ESAI Energy expects less bearish global oil demand

ESAI Energy expects less bearish global oil demand

Baku, Azerbaijan, Oct. 28
By Aygun Badalova - Trend:

Energy Security Analysis (ESAI), which is the leading US-based independent research firm, predicts global oil demands growth at one million barrels per day (bpd) in 2014, which is 300,000 bpd more than IEA's (International Energy Agency) latest forecast.

There has been plenty of bearish talk about petroleum product demand lately, ESAI Energy said in a report obtained by Trend on October 28.

Publications of the International Monetary Fund'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 percent.

At the same time the IEA has recently lowered global oil demand to 700,000 bpd, partly due to weak year-on-year demand growth in the fourth quarter. IEA's oil demand growth forecast for 2015 has been also revised down to 1.1 million bpd.

"The forecast of global oil demand for 2014 has been revised 0.2 million bpd lower since last month's report, to 92.4 million bpd, on reduced expectations of economic growth and the weak recent trend. Annual demand growth is now projected at 0.7 million bpd in 2014, rising tentatively to 1.1 million bpd in 2015, as the macroeconomic backdrop improves," IEA's October Oil Market report said.

ESAI Energy expects global oil demand to grow by 1.2 million bpd both in 2015 and 2016.
ESAI Energy data and forecasts also paint a less bearish picture of refined product demand growth in China with LPG demand growth at 120,000 bpd and gasoline demand growth at 210,000 bpd this year.

"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," ESAI Energy's analyst John Galante said. "Weak underlying crude prices will also drive demand growth in the years ahead," he said.

In terms of prices, especially for products like diesel and jet fuel, ESAI Energy believes its relatively robust global demand picture will offset some of the bearish pressure on spreads that is coming from big additions to supply.

"Fundamentals are nor weakening so drastically, that the bottom will fall out of margins during the next two years," Galante said.

Early this week West Texas Intermediate (WTI) for December delivery dropped as much as $1.57 to $79.44 a barrel in electronic trading on the New York Mercantile Exchange. This figure is the lowest intraday level since June 29, 2012.

December Brent, which is the benchmark price for products in Europe and Asia, downed as much as $1.50 to $84.63 a barrel on the London-based ICE Futures Europe exchange.

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