Global oil demand has weakened significantly over the past few months, largely owing to the slowing economic momentum across most markets, says energy and commodities company Vitol analyst Simon Warren.
He told delegates at the annual conference of the African Refiners and Distributors Association, in Cape Town, last month, that world trade measures, shown by container traffic and air freight traffic, were down. Manufacturing sentiment had also fallen from its bullish 2018 peak.
“We’ve gone from a synchronised strong economic activity to one where the market is increasingly worried about economic growth.”
In mid-2017, oil prices doubled to “unsustainable levels”, then came down again, and have now partially recovered.
“Investor flows have started to recover. We have a happy medium between consumer and producer at this stage,” said Warren.
The performance in China had been the exception, he noted.
“Its industrialisation has been nothing short of miraculous,” said Warren, with Chinese crude imports having more than doubled from 2012 to 2019.
Demand was also starting to pick up in India.
“India has disappointed in the past couple of years, but has improved.”.
Warren forecast an anticipated tug-of-war between demand and supply this year.
“We’re going to see interesting price moves, but don’t expect too big a problem in terms of fuel stocks.”
Warren said price and infrastructure remained key for US crude production. The bulk of crude was coming from its shale basins, where production had doubled within a couple of years.
“Technology, price and willingness to deliver have boosted production to make it one of the biggest producers in the world.”
Warren said there had been a significant ramp-up in new refining capacity. In particular, the US had been “ramping up its crude” and had become the “most aggressive refining industry” in the world.
He said the quality of oil was getting “lighter and sweeter”, while, globally, the world was manufacturing too much petrol.
“The global seaborne crude slate is getting lighter. The marginal barrel is now light and sweet.”
He said Africa would benefit from increased product flows, with West Africa traditionally a home for Europe’s excess petrol.
In the long run, Warren said, he did not expect global oil demand to peak before 2035. He said legacy fleet and surging car ownership in the emerging markets was expected to initially limit the impact of electric vehicles (EVs).
Some 84-million cars are sold every year. “The growth has been rampant, [especially in] emerging markets. China has doubled its car sales in the last ten years.”
He expected that China would make up 20% of the market share for EVs and hybrid vehicles globally by 2030.