Editorial comment
So far, we have apparently been experiencing a warmer than usual winter. The last few weeks have encouraged me to disagree with this statement as my boiler broke down and I was without heating as a cold snap took hold and snow appeared (it doesn’t help that I tend to feel the cold no matter what the temperature)! However, looking at the stats and, despite my own unfortunate circumstances, this is indeed true.
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Merrill Lynch, in the Global Energy Weekly report ‘The Sleeping Giant’ pointed out that so far in the US and OECD Europe the temperature has been 0.5 °C and 1.4 °C standard deviation respectively from the historical mean. This unusual temperature variation is having an impact on current oil demand, and if it continues, is expected to impact overall demand for the first quarter of this year. European demand is likely to fall by 230 000 bpd and US demand by 140 000 bpd, when compared to demand during periods of normal January weather. Also, if temperatures continue to hover in this uncommon range, it is predicted that the average Brent price per barrel will remain within the US$ 110 – 112 range with no room or reason to move. However, whilst the above is affecting both oil demand and prices, there are two other things that I believe we will need to keep an eye on during this first quarter (and beyond).
The Eurozone is still in the throes of recession and energy import costs remain somewhat unaffordable for the region. These costs (along with the mild winter weather) have resulted in such low levels of demand that recently Asia has been halting all cargoes to the continent and rerouting them to the US. Also, refinery maintenance season is approaching quickly, which of course means that the demand for feedstocks from Europe’s processing facilities will drop. So, it does indeed appear that the Eurozone is one area to watch for the next few months, if not the rest of the year, as despite accelerating global economic activity and improving confidence, there is no definite end in sight to the double dip recession.
Yet, it isn’t just doom and gloom that will have to be monitored. The emerging markets are continuing their economic growth so much so that Merrill Lynch expects to see ‘emerging markets contributing the most to global GDP growth’ in 2013. Thankfully for our industry, as the emerging markets grow, so does their demand for oil and oil products, and this year it is predicted that transport fuels will be the hot products on the market.