After falling during the first half of 2009, global oil demand rose 2.25 million barrels per day during the first six months of 2010. The oil demand story continues to be driven by emerging markets, especially China and India. This week’s chart from Deutsche Bank shows China and India’s share of global oil demand has increased 67 percent since 2002. This year, Chindia’s combined total accounts for 15 percent of global demand.
While demand growth has remained flat in the developed world in 2010, DB estimates that Asian oil demand (excluding Japan) is up 8 percent compared with the same time period last year.
China’s demand growth during the first half of the year outpaced what many had forecast, jumping 12 percent from January to July. India’s pace has been slower (up 3 percent year-to-date) but an 8 percent rise in demand for refined products like gasoline and diesel fuel reflects the country’s economic vitality, according to DB.
These developments are a catalyst for higher oil prices but Credit Suisse cautions that Chinese demand could soften in the back half of this year and into 2011 due to Beijing’s measures to slow the country’s economic growth. CS is forecasting China’s GDP growth to average 8.6 percent over the next four quarters, well below the 11.1 percent the country averaged during the first half of 2010. With less economic activity, the pace of Chinese demand growth should slow.
India’s oil demand growth also looks to be flattening out. The International Monetary Fund is forecasting the country’s oil demand will drop by 200,000 barrels per day during the second half of 2010.
Despite these immediate headwinds, the long-term supply/demand story for oil remains one of diminishing supply and growing demand. With emerging markets continuing to grow at a robust pace, there will be more people using more oil in more ways—a strong tailwind for higher prices.
