Oil demand growth to shift to petrochemicals away from motor fuels

In this April 24, 2015 file photo, pumpjacks work in a field near Lovington, New Mexico, US. (AP Photo/Charlie Riedel, File)
Updated 06 March 2018
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Oil demand growth to shift to petrochemicals away from motor fuels

LONDON: Strong global demand for oil and gas will shift in the next five years toward petrochemicals and away from motor fuels gasoline and diesel, the International Energy Agency (IEA) said.
Demand for products ranging from fertilizers to plastics and beauty products would drive roughly a quarter of the expected oil demand growth to 2023, the IEA said in its five-year outlook.
This would bolster more anaemic growth in gasoline and diesel, also known as gasoil, as fuel efficiency and declining developed world consumption takes its toll, it said.
World oil demand is expected to rise by 6.9 million barrels per day (bpd) to 2023, or 1.2 million bpd per year, it said, with a quarter of this growth, or 1.7 million bpd, coming from demand for petrochemical feedstocks ethane and naphtha.
“Global economic growth is lifting more people into the middle class in developing countries and higher incomes mean sharply rising demand for consumer goods and services,” the IEA said.
“A large group of chemicals derived from oil and natural gas are crucial to the manufacture of many products that satisfy this rising demand,” it added.
Naphtha is made by oil refineries processing crude, but other petrochemical feedstocks — ethane or liquefied petroleum gas (LPG) — largely bypass the refining industry.
The boom in US shale oil boom has dramatically expanded the availability of ethane, and a string of new projects on the US Gulf Coast are underway to process it.
In total, the world is expected to add 1.4 million bpd in new petrochemical-producing steam crackers to 2023, the IEA said.
Demand for ethane would expand by the fastest pace in the next five years, rising by 885,000 bpd, followed by naphtha with growth of 495,000 bpd and LPG with growth of 40,000 bpd, it said.
Jet fuel, supported by growing demand for air travel, would grow by a 1.2 percent to 2023, the IEA said.
But it said demand for gasoline and diesel would rise by 0.7 percent each, with expansion slowed by fuel efficiency standards that now cover two thirds of the world’s top car markets.
More than 80 percent of global car sales are now in markets covered by efficiency standards, including China, India the US and Europe. The IEA said this “will impact strongly on future oil demand.”


Oil prices up almost 3% as OPEC agrees to raise output

Updated 22 June 2018
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Oil prices up almost 3% as OPEC agrees to raise output

  • Oil prices rose almost 3 percent on Friday as OPEC agreed a modest increase in output to compensate for losses in production at a time of rising global demand.
  • The Organization of the Petroleum Exporting Countries agreed on Friday to boost output from July.

LONDON: Oil prices rose almost 3 percent on Friday as OPEC agreed a modest increase in output to compensate for losses in production at a time of rising global demand.
Benchmark Brent crude jumped $2.19 a barrel, or almost 3 percent, to a high of $75.24 before slipping to around $75 by 1305 GMT. US light crude was $1.80 higher at $67.34.
The Organization of the Petroleum Exporting Countries, meeting in Vienna, agreed on Friday to boost output from July after Saudi Arabia persuaded Iran to cooperate in efforts to reduce the crude price and avoid a supply shortage.
Two OPEC sources told Reuters the group agreed that OPEC and its allies led by Russia should increase production by about 1 million barrels per day (bpd), or 1 percent of global supply.
But the real increase will be smaller because several countries that recently underproduced oil will struggle to return to full quotas while other producers will not be allowed to fill the gap.
The deal looked to be in line with many analysts' forecasts.
Analysts had expected OPEC to announce a real increase in production of 500,000 to 600,000 barrels per day (bpd), which would help ease tightness in the oil market without creating a glut.
"The effective increase in output can easily be absorbed by the market," Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas told Reuters Global Oil Forum.
Oil prices have been on a roller-coaster ride over the last few years, with the international marker, Brent, trading above $100 a barrel for several years until 2014, dropping to almost $26 in 2016 and then recovering to over $80 last month.
The most recent price rally followed an OPEC decision to restrict supply in an effort to drain global inventories.
The group started withholding supply in 2017 and this year, amid strong demand, the market tightened significantly, triggering calls by consumers for higher supply.
Falling production in Venezuela and Libya, as well as the risk of lower output from Iran as a result of US sanctions, have all increased market worries of a supply shortage.
Another big uncertainty for oil is the escalating dispute between the United States and its trading partners, which could hit US crude oil exports to China.
Asian shares hit a six-month low on Friday as tariffs and the US-China trade battle start taking their toll.
If a 25 percent duty on US crude imports is implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere.
Chinese buyers are already starting to scale back orders, with a drop in supplies expected from September.