Exuberant oil demand

Saudi Energy Minister, Khalid al-Falih, throws caution out the window and predicts that demand for oil and gas this year, could turn out to be “way in excess” of 2017’s exuberant levels. Demand has played a significant part in oil price recovery in early 2018 where it hit a three-year high.

With the ever-increasing consumption of oil, we wondered where the demand is coming from.

  • Manufacturing: Consumers continue consuming, especially in China, where 2017 industrial production grew at the fastest pace since 2014.
  • International travel: Passenger airline data from China showed an increase of 15% in 2017. Chinese citizens are traveling at the fastest rate of annual growth since 2009, mainly due to an increase in the economy. The fuel consumption for commercial airlines overall, is set to increase by 5%.  
  • Shipping: Freight costs are up 25% higher than last year, again traceable back to China and its huge demand for coal and iron ore. But it’s not just China: global growth for containerized goods is growing at the fastest rate since 2013.
  • Trucking: Road freight in the U,S, surged by 12.5% year on year in January, which is a strong gauge of increased fuel demand.

“Global synchronized economic growth — across developed and emerging markets — is driving a notable uptick in manufacturing and trade, boosting construction and freight movements which look to be behind renewed growth in diesel demand, after several years in the doldrums,” said Eric Lee, an analyst at Citigroup Inc.

The oil market, and shall we say the glut that OPEC has tried to curb, are seeing signs of rebalancing and it seems that global demand is giving it the final push to rebalance.

To read the full article titled, “Planes, Trains and Trucks: Global Trade Boom Fires Up Oil Demand,” click here.