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Demand: Delta, Economic Slowdown Hurt Non-OECD Oil Demand Hardest

Copyright © 2021 Energy Intelligence Group
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The expectation that demand would improve every month through the rest of 2021 was overly optimistic. As the Covid-19 Delta variant creates new economic headwinds, August is poised to be the peak demand month this year, with no significant improvement until the second half of 2022. The pace of vaccinations in emerging markets is still lagging developed economies. Earlier worries that even in OECD countries the pandemic would stick around longer have now crystallized more than feared with the flare-up of the Delta variant. In addition, a surge in coronavirus caseloads is seizing large swaths of Asia and Latin America. The market is witnessing an economic growth deceleration in large demand stalwarts like China, Indonesia, Japan and Brazil. With refining closing in on the fall shoulder season, demand prospects for the remainder of the year have been dampened. The demand forecast has been adjusted 480,000 barrels per day down to reflect the impact of containment policies being reinstated around the world to fend off the spread of the Delta variant. Global demand is now seen rising by 5.4 million b/d on the year, to an average 97.4 million b/d in 2021, and by a further 2.9 million b/d in 2022, an upward revision of 100,000 b/d. Demand in July was up 1.8 million b/d at 99.5 million b/d, almost all of it coming from developed economies (OMI Jul.19'21). OECD Americas contributed 710,000 b/d of additional consumption, but OECD Europe eventually caught up with 767,000 b/d of incremental demand month on month. Efficient vaccination campaigns have successfully brought mobility back, allowing people to drive to holiday destinations and also fly more after 18 months of frustrating lockdowns. July OECD demand recovered by 4.6 million b/d year on year (related). But the divide between emerging markets and developed economies has widened further, creating an economic decoupling across regions. GDP growth in Europe and the US has remained strong, backed up by household savings and continued fiscal stimulus. Despite a new wave of Covid-19 caseloads, high vaccination rates there are minimizing disruptions to -- still limited -- mobility. In Australia, Brazil, China, Japan and Russia, the economy is decelerating. New records of Delta variant cases have forced China, despite its high vaccination rate, to shut down all air travel in and out of the country for 30 days. Japan and South Korea have also reinstated stricter containment measures. Iran has declared a state of emergency and called for UN help. The resulting economic slowdown was already visible in July, with China shedding 327,000 b/d of consumption month on month, while total non-OECD Asian demand came in 651,000 b/d lower (related). In the non-OECD, demand increased by a mere 25,000 b/d in July, with only moderate prospects of improvement in August. The Delta variant, especially in Asia and Latin America, and the slow pace of vaccinations there are denting product consumption. Global demand in the third quarter is still expected to rise by 4 million b/d quarter on quarter, which remains three times larger than the increase registered between the first and the second quarter of the year. With the US and European peak summer driving ending and refining already moving into the shoulder fall season, the upside in the fourth quarter is seen at just 300,000 b/d on the quarter. OIL DEMAND TRENDS IN KEY COUNTRIES AND REGIONS ('000 b/d) 2021 Chg. vs. 2020 2021 OECD-34 May Jun Jul Jun '21 Jul '20 Year Q1 Q2 Q3 Year Americas 24,346 25,128 25,838 710 3,234 22,539 22,943 24,433 25,835 24,604 US 20,094 20,472 20,822 350 2,499 18,120 18,516 20,009 20,801 19,875 Canada 2,022 2,240 2,464 225 271 2,192 2,124 2,141 2,562 2,342 Mexico 1,651 1,800 1,882 83 378 1,581 1,617 1,704 1,822 1,737 OECD Europe 12,145 12,989 13,757 767 759 12,437 12,079 12,517 13,556 12,889 Europe Big 5* 6,817 7,464 7,929 465 645 6,923 6,678 7,027 7,708 7,250 Germany 1,991 2,149 2,362 212 115 2,149 1,882 2,050 2,287 2,119 France 1,372 1,565 1,731 166 153 1,421 1,475 1,437 1,648 1,525 UK 1,209 1,352 1,342 -9 248 1,215 1,156 1,262 1,347 1,281 Italy 1,131 1,189 1,249 60 32 1,050 1,043 1,137 1,215 1,149 Spain 1,114 1,208 1,244 36 97 1,088 1,122 1,141 1,210 1,176 EU-15 9,637 10,335 10,902 567 746 9,816 9,482 9,891 10,684 10,154 Other OECD Europe 2,465 2,646 2,847 200 6 2,621 2,468 2,535 2,868 2,677 Asia Oceania 6,867 7,013 7,285 272 605 7,140 7,667 7,027 7,372 7,474 Japan 2,896 3,197 3,330 132 310 3,326 3,731 3,124 3,396 3,494 South Korea 2,476 2,377 2,488 111 153 2,437 2,547 2,426 2,503 2,516 Australia 1,105 1,068 1,077 9 105 1,022 1,034 1,087 1,086 1,082 Total OECD-34 43,358 45,131 46,880 1,749 4,598 42,116 42,688 43,977 46,763 44,968 Non-OECD Asia 27,859 29,261 28,610 -651 736 27,077 28,233 28,476 28,833 28,908 China 14,130 14,665 14,338 -327 311 13,116 14,003 14,114 14,644 14,414 India 4,317 4,774 4,770 -4 320 4,651 5,130 4,668 4,736 4,952 Indonesia 1,750 2,018 1,832 -186 211 1,631 1,628 1,832 1,824 1,789 Taiwan 902 879 885 5 7 853 906 883 864 884 Thailand 1,262 1,262 1,301 39 56 1,192 1,284 1,264 1,298 1,320 Middle East 8,157 8,345 8,261 -84 143 8,116 7,882 8,113 8,358 8,013 Saudi Arabia 2,987 2,894 3,090 196 -111 2,977 2,680 2,915 3,046 2,790 Iran 1,801 1,827 1,832 5 179 1,764 1,874 1,798 1,746 1,807 Latin America 5,631 5,173 5,942 768 525 5,265 5,647 5,368 5,667 5,579 Brazil 3,015 2,543 3,140 597 216 2,962 3,092 2,867 3,185 3,081 Venezuela 340 334 314 -20 -5 321 352 307 298 324 Argentina 889 935 943 8 107 679 790 813 768 787 FSU 4,684 5,038 4,994 -44 396 4,670 4,832 4,775 5,134 4,951 Africa 4,445 4,004 4,092 88 25 4,176 4,365 4,155 4,131 4,249 Egypt 629 632 569 -63 -4 605 624 620 580 609 South Africa 570 564 591 27 -57 648 622 582 601 605 Non-OECD Europe 760 816 763 -52 143 661 710 783 799 775 Total Non-OECD 51,536 52,637 52,661 25 1,968 49,965 51,668 51,669 52,922 52,476 Total World 94,895 97,767 99,542 1,774 6,566 92,081 94,357 95,646 99,686 97,443 Asia - Total 33,231 34,835 34,428 -407 1,200 32,839 34,510 34,026 34,732 34,918 Opec 8,444 8,865 8,934 69 438 8,372 8,526 8,420 8,952 8,662 Totals include other countries or territories with the exception of OECD Europe.

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