Oil: Sluggish start to the year for global demand – Standard Chartered

The analysis team at Standard Chartered estimates that global oil demand rose 770 thousand barrels per day (kb/d) y/y, the slowest growth since September 2016 and less than half the rapid growth of Q4-2016.

Key Quotes

 “The latest monthly data by the Joint Oil Data Initiative (JODI), released on 18 April, allows us to derive an initial broad-based estimate of global oil demand in February. We estimate that global demand rose 770 thousand barrels per day (kb/d) y/y, the slowest growth since September 2016 and less than half the rapid growth of Q4-2016. We also estimate that non-OECD demand growth was 1080kb/d y/y in February, which was the strongest in six months. In contrast, OECD demand fell 312kb/d y/y, far weaker than the 802kb/d average growth recorded in the previous six months. Indeed, February was the only the fourth month in the past two years to show a y/y fall in OECD demand.”

“We do not think that the slowdown in oil demand growth is a precursor of weaker global economic data, or that it necessarily implies that oil demand will disappoint across the whole year. The weakness in February was primarily due to falling y/y demand in four OECD countries: Canada: -90kb/d the UK: -91kb/d, Japan: -92kb/d and the US: -116kb/d. Temperatures were significantly higher than usual in all four countries in February; for example, heating degree days were 16% lower y/y in the US, which we think alone reduced demand by c.250kb/d.”

“OECD demand growth should look stronger as weather effects work their way out of the data. We think that global oil demand growth will average 1.53 million barrels per day (mb/d) in 2017, with Q1 proving to be the weakest quarter due to the relative mildness of the northern hemisphere’s winter. We predict that global oil demand will swing up from February’s 98.01mb/d to a seasonal peak of 99.91mb/d in August, providing a significant further tightening of global balances and accelerating inventory draws in Q3.”