Written on: March 5, 2018

Global Oil Demand To Rise in 2018

Global demand is expected to grow in 2018. This reflects acceleration of growth of economies in Europe and India. Even the United States’ mature economy is projected to grow this year. China, long a major contributor to demand growth is likely to experience a slowdown. Some analysts expect China’s economy to grow at 4.5% in 2018, well down from 6.5% at its recent peak. China is reducing new procurement for its strategic reserve, cutting into demand. Another bearish demand element will be increasing fuel efficiency.

Global employment is growing, but at a decelerating rate. And with it a reduction in gasoline demand gains. This should be particularly apparent in the United States where unemployment is already approaching frictional levels.

Over a longer term, a more bearish tone has taken hold. BP, for example, concedes a peak in oil demand by 2040. The development of self-driving cars and innovative use of travel sharing are important factors. The Company expects a 100-fold increase in electric vehicles over this time.

The alternative fuel is likely to be electricity according to BP. The Company expects 30% of mileage to be satisfied by electric. And 15% of the car fleet will be electric powered. New technology will allow for more intense use of automobiles.

Oil demand growth may come from petrochemicals. But even there, constraint on plastic items could limit demand growth.

Renewable power is expected to grow by 40% until 2040. BP expects its share of total energy to reach 14% cent.

Supply and Demand Balances

Supply and demand data in the United States for the week ending February 23, 2018 were released by the Energy Information Administration.

Total commercial stocks of petroleum rose 3.7 million barrels during the week ending February 23, 2018.

There were draws in stocks of heating oil, propane, and other oils. Builds were reported in stocks of gasoline, fuel ethanol, and residual fuel. Stocks of K-jet fuel were unchanged from the previous report week.

Commercial crude oil supplies in the United States increased to 423.5 million barrels, a build of 3.0 million barrels.

Crude oil supplies increased 0.6 million barrels in PAD District 1 (East Coast), PADD 3 (Gulf Coast) crude stocks rose 4.5 million barrels, and PADD 5 (West Coast) stocks advanced 0.3 million barrels. PADD 2 (Midwest) stocks declined 2.3 million barrels and PADD 4 (Rockies) stocks fell 0.2 million barrels.

Cushing, Oklahoma inventories decreased 1.2 million barrels from the previous report week to 28.8 million barrels.

Domestic crude oil production increased 13,000 barrels daily to 10.283 million barrels per day from the previous report week.

Crude oil imports averaged 7.282 million barrels per day, a daily increase of 261,000 barrels. Exports fell 599,000 barrels daily to 1.445 million barrels per day.

Refineries used 87.8 per cent of capacity, a decrease of 0.3 percentage points from the previous report week.

Crude oil inputs to refineries increased 49,000 barrels daily; there were 15.882 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 61,000 barrels daily to 16.251 million barrels daily.

Total petroleum product inventories saw an increase of 0.7 million barrels from the previous report week.

Gasoline stocks increased 2.5 million barrels from the previous report week; total stocks are 251.8 million barrels.

Demand for gasoline decreased 142,000 barrels per day to 8.860 million barrels daily.

Total product demand decreased 582,000 barrels daily to 19.872 million barrels per day.

Heating oil fuel supply fell 1.0 million barrels from the previous report week to 138.0 million barrels. National heating oil demand was reported at 3.921 million barrels per day during the report week. This was a weekly decrease of 303,000 barrels daily.