Demand: Consumption Gears Up for Summer Spike After Slow May

Some of the friction points observed in the first quarter of the year have persisted into the second, but the demand outlook for the remainder of 2021 remains constructive. Despite a 340,000 barrel per day downward revision in February -- mostly the afterglow of the North American Winter Storm Uri on Mexican demand statistics -- OECD demand is up by 200,000 b/d for the year to 45.2 million b/d. March has been revised up by 210,000 b/d and April by 70,000 b/d (OMI May19'21). In the non-OECD, demand is down 100,000 b/d to 52.6 million b/d for the year 2021, which mirrors the temporary drag of Covid-19 variants in several Asian and South American countries. The higher traction from the OECD after February, on the contrary, reflects the relative strength of US consumer demand and the American economy after its second shot of fiscal stimulus. Global oil demand has already reset on a stronger growth trajectory this year, gaining 5.8 million b/d to 97.8 million b/d, and another 2.7 million b/d in 2022, to 100.5 million b/d. Memorial Day usually marks the official start of the US summer driving season. A similar trend is also shaping in Europe, which is still gradually reopening its hospitality and tourism industry in due time for the holidays. The limitations on air travel could boost road travel, but Europe’s airspace opens more after Jul. 1 (related). Domestic air travel in big countries like the US, Russia or China has already picked up and is close to pre-pandemic levels. A late accumulation of bullish bets in gasoil futures is showing an improving gasoil/diesel market, which is poised to be next to recover after gasoline (related). OECD demand in May was down 662,000 b/d on the month, with some seasonality slipping back in, but nonetheless 6.5 million b/d higher year on year. Non-OECD was up by a more modest 3.4 million b/d on the year: it had dealt with much of the pandemic early in 2020 before relapsing. Global demand is now set to gain 1.5 million b/d in the second quarter of 2021. The relaxation of Covid-19 restrictions in OECD countries has boosted mobility, notably in the US and Europe, allowing the economic recovery there to shift to a higher gear and contribute 2.1 million b/d of demand growth in the second quarter. Global June consumption is seen nearly 4 million b/d up from May (related). The relapse in Covid-19 cases in India, Malaysia, Thailand and some parts of Latin America (Argentina, Brazil) has been slowing the pace of demand recovery, mostly from large consumers such as India. For now, the pandemic lingers, and the uneven vaccine distribution is another drag on the pace of demand recovery in non-OECD economies. But a low base effect combined with strong economic growth will take over from the expected spike of exuberant summer consumption. This should coincide with a stronger impetus from non-OECD Asia, which remains the main driver of global oil demand growth in 2021 and 2022. Beyond the recovery in transportation, economic growth will also fuel global demand for petrochemical feedstock, notably in China (related). The continued need for medical equipment and plastic packaging had already spared petrochemical demand from the Covid-19 crisis in 2020. It stays strong this year. OIL DEMAND TRENDS IN KEY COUNTRIES AND REGIONS ('000 b/d) 2021 Chg. vs. 2020 2021 OECD-34 Mar Apr May Apr '21 May '20 Year Q1 Q2 Q3 Year Americas 23,899 24,152 23,684 -468 3,662 22,560 22,916 24,596 25,853 24,654 US 19,204 19,709 18,936 -774 2,833 18,120 18,516 19,871 20,801 19,840 Canada 2,075 1,974 2,109 135 227 2,102 1,997 2,119 2,422 2,234 Mexico 1,845 1,863 1,949 86 534 1,680 1,726 1,951 1,972 1,908 OECD Europe 12,584 13,176 12,990 -186 2,296 12,434 12,113 13,137 13,817 13,174 Europe Big 5* 7,064 7,485 7,248 -236 1,538 6,911 6,683 7,400 7,750 7,355 Germany 2,029 2,218 2,125 -93 53 2,154 1,890 2,169 2,303 2,158 France 1,545 1,588 1,509 -79 308 1,433 1,492 1,554 1,650 1,560 UK 1,220 1,380 1,329 -51 531 1,214 1,162 1,370 1,403 1,331 Italy 1,043 1,099 1,067 -32 279 1,021 1,009 1,102 1,167 1,108 Spain 1,227 1,199 1,218 19 367 1,089 1,131 1,205 1,227 1,198 EU-15 9,965 10,589 10,319 -270 1,889 9,849 9,544 10,498 10,973 10,455 Other OECD Europe 2,487 2,469 2,669 201 404 2,585 2,396 2,599 2,846 2,666 Asia Oceania 7,483 7,107 7,099 -8 541 7,070 7,608 7,022 7,220 7,382 Japan 3,590 3,303 3,354 50 626 3,274 3,705 3,253 3,300 3,471 South Korea 2,478 2,437 2,281 -156 -286 2,413 2,523 2,347 2,453 2,465 Australia 1,077 1,081 1,083 1 149 1,020 1,031 1,076 1,081 1,077 Total OECD-34 43,966 44,435 43,773 -662 6,499 42,065 42,637 44,755 46,890 45,211 Non-OECD Asia 28,146 28,670 27,754 -916 698 27,103 28,246 28,324 28,519 28,723 China 13,666 13,826 13,844 18 450 13,116 14,003 13,974 14,121 14,111 India 5,220 4,923 4,317 -606 104 4,651 5,130 4,572 4,586 4,875 Indonesia 1,703 1,732 1,912 180 356 1,631 1,630 1,887 1,824 1,803 Taiwan 897 896 899 3 34 853 906 891 861 884 Thailand 1,394 1,316 1,319 4 137 1,192 1,295 1,316 1,298 1,335 Middle East 8,160 7,903 7,945 42 700 8,116 8,202 8,142 8,744 8,356 Saudi Arabia 2,801 2,791 2,927 136 296 2,977 2,864 2,949 3,354 3,043 Iran 1,839 1,767 1,801 34 114 1,764 1,874 1,798 1,746 1,830 Latin America 5,627 4,955 5,420 465 816 5,265 5,706 5,285 5,660 5,578 Brazil 2,935 2,803 2,804 1 281 2,962 3,119 2,834 3,178 3,084 Venezuela 342 245 340 95 28 321 352 307 298 324 Argentina 829 612 889 277 354 679 790 813 768 787 FSU 4,241 4,604 4,684 80 366 4,670 4,832 4,808 5,134 4,959 Africa 4,408 4,005 4,445 441 657 4,176 4,365 4,155 4,131 4,249 Egypt 609 596 627 31 76 605 620 617 578 606 South Africa 653 629 598 -31 -36 648 653 609 626 631 Non-OECD Europe 751 774 760 -14 185 661 710 783 799 775 Total Non-OECD 51,332 50,911 51,008 97 3,422 49,991 52,061 51,496 52,987 52,640 Total World 95,298 95,346 94,781 -564 9,920 92,056 94,698 96,252 99,877 97,851 Asia - Total 34,213 34,411 33,389 -1,021 1,039 32,790 34,474 33,924 34,272 34,659 Opec 8,519 7,951 8,444 494 975 8,372 8,526 8,420 8,952 8,662 Totals include other countries or territories with the exception of OECD Europe.