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27 May 2024

Mideast among key players to drive oil demand

Oil demand is to drop in the West and swell in the region. (PATRICK CASTILLO)

By Shashank Shekhar

Middle East will be the one of the largest contributor to oil demand in 2009, even as the global demand for oil will climb down, a new report has said.

Gulf Investment House (GIH), in its latest report, said the demand for oil in the Middle East in 2009 will stand at 7.10 million barrels a day (bpd), up 250,000 bpd from the 2008 average of 6.85 mbpd.

The Kuwait-based financial advisory firm said the global demand for oil in 2009 will stand at 85.66 mbpd. This would be a decline of 0.2 mbpd from 2008 levels.

The decline in oil's demand in the OECD countries will outweigh the rise in demand in the developing world, GIH said. Apparently, it will be the first time in 25 years that the demand for oil will decline on a global level.

The rise in demand for oil in the Middle East will be equal to decline in its demand in Western Europe, the same report said. "World oil demand growth will come largely from China, Middle East and other parts of Asia. In 2008, high oil prices and removal of subsidies in the first seven months and the economic crisis in the second half led to oil demand destruction. The gloomy economic outlook for 2009 with major world economies in recession is expected to a lead to a further decline in oil demand," GIH said.

Oil demand is supposed to swell in the Middle East and decline in the West. Interesting as it may seem, while the Middle East countries, primarily Opec members, have lowered their oil supply in 2009, the OECD will enhance it. "Non-Opec supply is to average 51.15 mbpd in 2009, an increase of 0.58mbpd over 2008. Oil supply from the US is expected to increase by around 0.19 mbpd to 7.7 mbpd in 2009 compared to the estimated 2008 levels."

GIH said the developing countries will be the major contributors of non-Opec supply growth. "Oil supply from developing countries is projected to increase by 0.44 million barrels in 2009 to 12.71 mbpd from 2008 levels. Latin America is expected to be the main contributor of growth in the developing countries group category," GIH said.

Refinery utilisation in most of the countries have declined in recent months, GIH pointed out. However, the refining margins have increased, the report added.

"Arrival of cold weather and some refinery shutdowns have pulled the margins into the positive territory," the report said.

While the prices of all the major petroleum products witnessed a decline in December, with the exception of fuel oil, the report said. PFC Energy, the Washington based energy analysis firm had also forecasted a rise in demand for oil in 2009, in two of its recent reports.

Petroleum stocks across the world have been rising, data presented by GIH showed. "Total US commercial stocks stood at 1,016 million barrels a the end of December 2008 compared to 1,014.1 million barrels at the end of November 2008, with distillate fuel stocks increasing the most by 10.2 million barrels during December 2008 at 137.6 million barrels," the report said.