Released on December 9, 2009
(Next Release on December 16, 2009)
Short-Term Forecast is for Asian Oil Demand Growth
With the emerging Asian economies rebounding from the global economic downturn faster than the G-7 economies, the Asia-Pacific region is the leading driver of global economic recovery and higher oil demand. Although the emerging Asian economies were generally less exposed to financial risks and credit default arrangements than the U.S. and European economies, many of them have taken strong stimulus measures throughout 2009 that are expected to boost domestic demand, financial credit, and greater investment in transportation and infrastructure. Growth in oil demand will follow the increases in economic activity. The region's oil demand declined for 4 consecutive quarters during the second half of 2008 and first half of 2009 as a result of severely declining export-led sectors; however, by the third quarter of 2009 the region's oil demand was above its level in the third quarter of 2008.
The current global recession has affected Asian countries to varying degrees. EIA expects regional GDP, on an oil-consumption weighted basis, to grow by less than 1 percent in 2009 from the prior year. Despite the upturn in oil demand in the second half of 2009, EIA's latest Short-Term Energy Outlook forecast for 2009 shows the first annual average oil demand reduction in Asia since the Asian financial crisis in 1998.
China is leading both the Asian recovery and the rebound in the region's oil demand. As a result of the $586 billion (RMB 4 trillion; the RMB is the Chinese currency) fiscal infusion to stimulate several sectors including transportation, infrastructure, and manufacturing, China's overall domestic consumption levels and industrial output began rising earlier this year. As China uses its stimulus package to build up domestic demand and address public works projects such as infrastructure development, the country's demand for less commonly used oil products, such as asphalt, has contributed significantly to incremental demand. Demand for naphtha in China's rising petrochemical industry, as well as for gasoline and gasoil, has gradually picked up in the second half of 2009. EIA estimates China's overall oil demand in 2009 will be nearly 400 thousand barrels per day (bbl/d) above its 2008 level, growing from 7.83 million bbl/d to 8.21 million bbl/d. In 2010, EIA anticipates China's GDP growth to top 8 percent, leading to oil demand 4.9 percent higher than 2009, reaching a level of 8.61 million bbl/d.
Oil demand in India, the other engine of Asian growth, demonstrated growth throughout 2009, and EIA estimates that absolute growth will average 150 thousand bbl/d, raising the 2009 level to 3.11 million bbl/d. Because India's economy is highly service- and technology-oriented rather than like the export-oriented East Asian economies, the country is less susceptible to falling global demand for industrial products, resulting in less volatile energy demand than other Asian economies. The Indian government announced several stimulus packages since late 2008, funded mostly through tax cuts and monetary measures. The stimulus spending in 2009 has already boosted diesel and gasoline demand as the government targets growth in the infrastructure, transportation, and manufacturing sectors. The government-controlled retail pricing scheme and subsidized oil products, such as LPG, props up oil demand as well. EIA expects India's economy to incrementally grow in 2010 in light of higher fiscal spending as part of the new 2009-10 budget and lead to an additional 130 thousand bbl/d of oil in 2010.
Other Asian market economies (excluding China and India) are showing significant turnaround in the latter half of 2009 as their industrial production has picked up some steam. Many of these countries are major exporters of intermediate industrial products to China. Therefore, as China's domestic and export demand rises in the short run, so, too, will the oil demand for these countries. South Korea, an OECD country, has demonstrated positive oil demand growth since the second quarter of 2009 on the back of an aggressive US$12 billion stimulus package focused on infrastructure development and a rise in naphtha use in its petrochemical industry. However, oil use in Japan, another OECD country and one of the largest oil-consuming nations, is still declining. Other factors contributing to declining oil use in Japan are strong energy efficiency measures and fuel switching in the power sector to nuclear and natural gas. As more nuclear facilities are brought out of maintenance, oil demand is expected to drop in this sector.
On the whole, EIA expects the Asia-Pacific region to exhibit positive oil demand growth led by fast-growing non-OECD countries such as China and India. Oil demand in 2010 should grow on average around 0.5 million bbl/d, rising to 25.5 million bbl/d for the region.
U.S. Average Gasoline Price Moves Up Half a Cent
At $2.63 per gallon, the U.S. average price for regular gasoline was half a cent above last week and $0.94 higher than a year ago. On a regional basis, prices declined somewhat in the Midwest, the Rocky Mountains, and on the West Coast while rising on the East and Gulf Coasts. The price on the East Coast increased a penny to $2.64 per gallon. Although the average price on the Gulf Coast gained two cents, it remained the lowest of any region at $2.52 per gallon. In the Midwest, the average dipped a fraction of a cent but remained at $2.57 per gallon. In the Rocky Mountains, the price dropped a penny to settle at $2.56 per gallon. The average on the West Coast slipped half a penny to $2.86 per gallon. The average in California fell a penny to $2.91 per gallon.
Recording the fifth consecutive weekly decrease, the national average price for diesel fuel slipped a fraction of a cent to $2.77 per gallon. The average is $0.26 per gallon higher than the average last year at this time. On a regional basis, the East Coast price was flat, while changes were mixed elsewhere. With the exception of the Rocky Mountains where the average dropped a bit more than a penny, prices in other regions, whether increasing or decreasing, each changed by less than one cent.
Propane Stocks Continue to Draw
Over the past eight weeks, propane inventories have plummeted 11.5 million barrels from a level well above the average range to near the lower boundary of the average range. Total U.S. inventories of propane fell by 1.3 million barrels last week to 61.4 million barrels. The Midwest regional stocks experienced the largest decline of 0.8 million barrels. The Gulf Coast region drew by 0.4 million barrels and the Rocky Mountain/West Coast region fell by 0.1 million barrels. The East Coast regional inventories grew slightly. Propylene non-fuel use inventories increased their share of total propane/propylene inventories from 3.4 percent to 3.5 percent. Propane production increased to the highest level since June 5, 2009 at 1.1 million barrels a day.
Residential Fuel Prices Increase
Residential heating oil prices rose during the period ending December 7, 2009. The average residential heating oil price gained 1.6 cents per gallon last week to reach 276.3 cents per gallon, an increase of 25.1 cents per gallon from the same time last year. Wholesale heating oil prices increased 1.3 cents per gallon to reach 206.8 cents per gallon, 54.9 cents per gallon higher than at this time last year.
The average residential propane price increased 4.6 cents per gallon to reach 233.8 cents per gallon. This was a decrease of 3.1 cents per gallon compared to the 236.9 cents per gallon average from the same period last year. Wholesale propane prices rose 5.6 cents per gallon, from 122.8 cents per gallon to 128.4 cents per gallon. This was an increase of 58.1 cents per gallon when compared to the December 8, 2008 price of 70.3 cents per gallon.