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.”


US economists less optimistic, see slower growth: survey

Updated 25 March 2019
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US economists less optimistic, see slower growth: survey

  • While the odds of a US recession by 2020 remain low, they are rising
  • The odds of a recession starting in 2019 is at around 20 percent, and for 2020 at 35 percent

WASHINGTON: US economists are less optimistic about the outlook and sharply lowered their growth forecasts for this year, amid slowing global growth and continued trade frictions, according to a survey published Monday.
And while the odds of a recession by 2020 remain low, they are rising, the National Association for Business Economics said in their quarterly report.
The panel of 55 economists now believe “the US economy has reached an inflection point,” said NABE President Kevin Swift.
The consensus forecast for real GDP growth was cut by three tenths from the December survey, to 2.4 percent after 2.9 percent expansion in 2018.
The economy is expected to slow further in 2020, with growth of just 2 percent, the report said.
Three-quarters of respondents cut their GDP forecasts and believe the risks of to the economy are weighted to the downside.
“A majority of panelists sees external headwinds from trade policy and slower global growth as the primary downside risks to growth,” NABE survey chair Gregory Daco said in a statement.
“Nonetheless, recession risks are still perceived to be low in the near term.”
Panelists put the odds of a recession starting in 2019 at around 20 percent, and for 2020 at 35 percent, slightly higher than in December.
Daco said that “reflects the Federal Reserve’s dovish policy U-turn in January” when the central bank said it would keep interest rates where they are for the foreseeable future, a message reinforced this week.
After four rate increases last year, Daco said a “near-majority of panelists anticipates only one more interest rate hike in this cycle compared to the three hikes forecasted in the December survey.”
Panelists see wage growth as the biggest upside risk to the economy, despite expected increase of just 3 percent this year, as inflation holds right around the Fed’s 2 percent target.
Meanwhile, amid President Donald Trump’s aggressive tariff policies, the panel projects the trade deficit will rise to a record $978 billion this year, beating last year’s record $914 billion.
In an interesting twist in the survey, only 20 percent said they expected to see the dreaded “inverted yield curve” — when the interest rate on the 10-year Treasury note falls below the 3-month bill — this year.
In fact, the yield curve inverted on Friday for the first time since 2007.