BAKU, Azerbaijan, August 7. The global economy's slowdown is having an inevitable impact on oil demand, Trend reports.
While 2022 benefited from strong GDP growth and a gradual recovery from COVID-induced lockdowns, this year is facing challenges due to an economic downcycle and less favorable base effects.
As a result, both crude prices and product crack spreads have significantly decreased from the highs seen last year, according to Fitch Solutions.
However, crack spreads remain elevated compared to pre-invasion levels, providing some support to pump prices but exerting additional pressure on demand. Although broader inflationary pressures are easing, global CPI growth is still high in historical terms, squeezing disposable incomes.
Driving growth, emerging markets (EM) are offsetting marginal declines seen in developed market (DM) counterparts. However, Central and Eastern Europe, as well as Sub-Saharan Africa (SSA), are diverging from the EM trend. The former is impacted by the Russia-Ukraine war, while the latter faces challenges due to the removal of fuel subsidies in Nigeria, which accounted for over a quarter of regional demand in 2022. Excluding Nigeria, SSA demand is expected to grow by 2.7% this year. Despite a notable deceleration in economic activity, there is optimism regarding consumption prospects in both Latin America and the Middle East & North Africa regions, where ongoing fuel subsidization is expected to support growth.
As expected, Asia, with a focus on China, remains the primary engine of growth in the oil market. The Mainland Chinese recovery has proven bumpier and more uneven than initially projected, with a tilt towards the less energy-intensive services sector. However, expanded crude import quotas for independent 'teapot' refiners, rising refinery throughput to meet higher fuel exports, and domestic crude stockpiling are all contributing to healthy growth in crude imports. Forecasts also indicate relatively robust domestic fuel consumption growth of 3.0% year-on-year in 2023, driven by resurgent demand in the aviation and petrochemicals sectors.
Overall, the global oil market is navigating through challenging economic conditions, with varying growth patterns across regions and sectors. Despite these headwinds, emerging markets and continued strong demand from Asia, particularly China, are expected to sustain growth and influence the direction of oil demand over the coming quarters.
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