APAC markets drive global oil demand

Source: Wood Mackenzie European Waterborne Products Report

Speaking at a Wood Mackenzie briefing as part of International Energy (IE) Week taking place in London, Gelder told attendees that APAC countries excluding China and India would account for 542 000 bpd of the increased demand with China accounting for 496 000 bpd and India 161 000 bpd. The robust growth in APAC contrasted sharply with Europe where demand has been projected to decline by 44 000 bpd due to weak economic growth.

“Asia more broadly will play a vital role in the global markets in 2024,” Gelder said. “Global economic growth is still not back to historical levels and this is being played out in Europe.”

He added that the Wood Mackenzie forecast for oil growth in 2025 would be lower at 1.4 million bpd with APAC again being the major driver accounting for over 59% of the total.

Gelder also said that in terms of oil production, members of the Organisation of Petroleum Exporting Countries (OPEC) can expect to be called upon to increase volumes to balance the market in 2024 despite the OPEC+ decision in November 2023 to implement a voluntary 2.2 million bpd cut for 1Q24.

“This production restraint will support oil prices and the Wood Mackenzie forecast for 2024 for the Brent average is US$85.90/bbl,” Gelder said. “We forecast Saudi Arabia’s production to average 9 million bpd in 1Q24 and 9.25 million bpd in 2Q24 as we assume 1Q production restraint continues through 2Q.”

Gelder added that Red Sea disruption caused by the continued attacks on vessels has witnessed over middle distillate products such as diesel, gas oil and jet fuel being diverted around the Cape of Africa. This has been supporting demand for bunker fuel.

“Jet cargoes have seen the biggest impact with over 60% of volumes diverting to the Cape as opposed to 45% of diesel and gasoil,” Gelder said. "This led to European jet fuel crack spreads spiking higher by over US$6/bbl for February, just under twice the increase witnessed by diesel.”

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