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BMI Global Oil Market Report
Business Monitor International, Oct 2011, Pages: 19
The BMI global oil supply and demand assumptions for 2011 and beyond have again been revisited, reflecting changes in the oil market and broader macroeconomic trends.
The second half of 2011 saw much of the market’s focus shift from concerns over supply, following the loss of Libyan volumes in February, to worries over the demand outlook, as macroeconomic conditions worsened across Western and emerging economies.
In BMI's view, the focus on demand-side dynamics will continue over the rest of 2011 and into 2012 as macroeconomic weakness feeds through into oil demand. BMI has downgraded the 2011 US real GDP growth forecast to 2.6% from 2.9% and the medium-term outlook offers little hope for a strong recovery. Even slower growth in the eurozone is expected –of around 1.9% - and mounting risks to growth in China are foreseen.
There is already evidence that worsening macroeconomic conditions and demand destruction resulting from high oil prices have started to hit oil consumption. In the US, it is now forecast that liquids consumption will grow by just 0.57% in 2011, compared to a growth rate of 2.01% in 2010. With signs that a disappointing summer driving season in the US is carrying on into the autumn, risks to this forecast are firmly to the downside, with potential for demand to actually shrink. The demand outlook for 2012 is only slightly higher at 0.7%, again with risk to the downside if macroeconomic conditions continue to deteriorate.
While growth has disappointed in Western economies, demand remained robust in emerging economies over H111, more than making up for slower-than-expected consumption in the West. China, of course, has been central to driving emerging market demand. However, government measures to counter inflation and address pollution concerns by limiting car sales and raising fuel prices look to be taking hold. Demand, although still robust, started to slow in the June and July and has continued to fall in August. Apparent oil demand grew by 7% year-on-year (y-o-y) to 8.98mn barrels/ day (b/d). While those are strong numbers, 8.98mn b/d was the lowest figure since October 2010 and the underlying growth trend is showing signs of slowing.
With government efforts to rein in inflation and address environmental concerns set to continue, further deceleration is expected in consumption growth through to the end of 2011 and into early 2012.
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