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Strong Growth In The Short Term For Global Oil Demand, IHS Markit Report

Strong Growth In The Short Term For Global Oil Demand, IHS Markit Report
A new analysis from IHS Markit, a global business information provider, shows that despite a focus of the auto industry on electric vehicles and the anticipated plateauing of oil demand sin the future, there is strong demand for oil in the short-term. The report claims that this trend is expected to continue through the end of 2020.
Over the last five years, there has been a growth 1.2 million barrels per day on the average in demand for refined product, IHS Markit says in the new report. The 2003 to 2007 commodity super-cycle period is described to be the ‘golden age’ of refining and the current demand for total liquids oil demand growth globally is being witnessed at similar levels to that period. The report says that about 100 million barrels per day is the current global total liquids oil demand.  
The report further predicts that the current refined product demand growth globally – which is quite strong, would continue to be the same through till the end of 2020 driven by robust economic growth and oil prices that are still under pressure. The report also forecasts that the average demand would be around 1.1 million barrels per day in the stated time frame. Driven by robust and converging economic growth in many markets around the world, the rate of growth for the global GDP will by around 3.4 percent in both 2018 and 2019, IHS Markit expects.
“Although electric vehicles (EVs) are making headlines, they are not yet a market force to replace the internal combustion engines that power today’s automotive fleets, so oil demand is currently growing strong,” said Spencer Welch, director, head of global short-term refining research at IHS Markit, and the report’s co-author. “Although EVs undoubtedly have the potential to disrupt the energy and automotive sectors in the longer term, they currently make up around 1.5 percent to 2 percent of total global vehicle sales, and account for less than 0.5 percent of the global vehicle fleet; so their influence on the oil market, in the short term, is limited.”
Some underlying significant differences between the current demand growth and that in the period between 2003 and 2007 were identified in the IHS Markit report through a comparison of the twqo periods.
“There are key differences between the oil market today and the oil market in 2003 to 2007, which is important when we seek to assess how sustainable this demand growth cycle is as compared to the past,” Welch said. “Demand growth now is currently more widely distributed, with the OECD (Organization for Economic Cooperation and Development, which includes 35 countries) region and NGLs (natural gas liquids) contributing much more to global oil demand than during 2003 to 2007. In addition, the global oil demand growth is supported by most refined products rather than being concentrated on diesel as it was in the previous period, which is putting less strain on refiners.”
“Refiners are also better prepared to meet current global demand growth than they were in the previous commodity super-cycle, and as a result, have been enjoying a ‘mini-golden age,’ which we expect to continue a while longer,” Welch said.

Christopher J. Mitchell

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