1) U.S. Gasoline Demand
American consumers use more gasoline then diesel or jet fuel. Gasoline demand usually begins to rise in February and peaks between June and August. Recent data has confirmed that American gasoline consumption has risen at a rate faster then any year since 1978, partially fueled by an uptick in sales of large “gas-guzzling” vehicles and positive employment data. According to the EIA, if the trend continues, the U.S. could be on track match its peak consumption of 9.3 million barrels a day (last achieved in 2007). However, some analysts believe that demand will slack off from here on. Indeed, last month’s employment data revealed that the U.S. economy created disturbingly few jobs, possibility indicating an economic slowdown.
2) Chinese Crude Oil Demand
Chinese crude oil demand has been tricky to dissect because the Chinese government recently permitted small refineries (called teapots) to operate independently from the government petroleum industry and their data is not included in the official Chinese oil usage data. Outside data showed that China imported 39% more crude oil in May 2016 than it did in May 2015 and it is estimated that the teapot refineries accounted for 15% of China’s total crude oil imports. However, the data also reveal corresponding significant growth in Chinese exports of refined products (especially diesel). It seems that the steady crude oil demand growth in China is not based on domestic consumption but rather a growing export industry. This could indicate that Chinese demand for crude oil may falter if its trade partners stop importing its refined products or if the government alters the teapot refinery situation. In fact, congestion in China’s ports cut oil imports by 4.3% last month.
3) Indian Crude Oil Demand
India, on the other hand, might become the next major source of crude oil demand. During the 169th OPEC meeting at the beginning of June, the organization identified India as a major source of demand for the coming decades. India consumed 4 million barrels of oil a day in 2015 and the IEA expects that number to grow to 10 million barrels a day by 2040. Many analysts see similarities between India’s economy and China’s economy ten years prior, but this analysis relies on India experiencing an explosion in manufacturing. India’s current Prime Minister is pushing policies to increase manufacturing and encouraging foreign companies to “Make in India.” Whether India can truly become a major manufacturing center remains unclear and a change in leadership could easily derail much needed pro-growth reforms.