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16

Annual Report 2016

petrochemical industry, marking solid improve-

ments in line with firm margins for naphtha cracker

operators. Oil demand was also encouraging in oth-

er parts of the region such as Indonesia, Malaysia,

Vietnam and Taiwan.

Latin America

Oil demand in the region’s largest consuming na-

tion — Brazil —continued its sluggish performance in

2016 with oil demand dipping by 90 tb/d y-o-y, con-

sistent with weakening macroeconomic conditions.

Declines were witnessed across all products, with the

exception of gasoline, which became a replacement

for ethanol and LPG, which grew marginally. On the

other hand, fuel oil and middle distillates weakened

in 2016. Gasoline demand growth was positive, re-

maining more economically viable to end users than

ethanol, which was affected by rising sugar prices.

Middle distillate demand was lower y-o-y; growth po-

tential deteriorated mainly as a result of slowing eco-

nomic factors. Demand from different sectors, practi-

cally the industrial sector, recorded sluggish numbers

coherent with poor manufacturing activity. Similar to

middle distillates, weakening economic conditions

contributed adversely to fuel oil demand numbers, as

less consumption was observed in power generation

segments and in the use of fuel oil as a bunker.

Middle East

In the Middle East, oil demand declined in Saudi

Arabia, the largest consuming nation in the region.

However, in 2016, oil demand declined slightly in

the region, by 10 tb/d y-o-y. The sharply rising level

of natural gas substitution, particularly after com-

mencement of the Wasit Gas Plan in 1Q16, coupled

with the Kingdom’s partial removal of subsidies, were

the main factors behind the decline. However, nega-

tive growth was observed in three products only —

direct crude burning, (other products) bitumen and

jet/kerosene. In addition, the drop in other products

consumption can be largely attributed to less-than-

anticipated demand in various sectors such as road

building and construction. Oil demand grew in the

United Arab Emirates and Iraq. Transportation fuels,

notably gasoline, dominated this increase.

China

In China, oil demand recorded better-than-ex-

pected growth, as demand from the petrochemical

and transportation sectors lent support to oil con-

sumption despite early doubts over a slowing overall

economic pace. China’s oil demand painted a simi-

lar picture to 2015, remaining driven by a number of

factors. The first of these is expansion in propylene

dehydrogenation plants in the petrochemical sector,

encouraging higher LPG and naphtha demand; sec-

ond, firm demand in the road transportation sector as

increasing car sales provided support to gasoline de-

mand; and third, increasing jet fuel drove demand for

the air transportation sector. On the other hand, the

consumption of residual fuel oil and diesel oil declined

mainly as a result of higher fuel substitution by natural

gas and coal, particularly in the industrial sector. LPG

and gasoline demand increased by about 24% and 4%

y-o-y, respectively, while jet/kerosene grew by about

9% compared with 2015. On the other hand, diesel oil

and fuel oil decreased by around 8% y-o-y.

World oil supply

The world’s liquids supply grew by 0.42 mb/d to aver-

age 95.87 mb/d in 2016, despite two years of global

E&P reductions of more than 45%. Cuts in interna-

tional oil companies’ (IOCs) CAPEX compared with a

year earlier relatively reflected crude oil, condensate

and natural gas liquids (NGLs) output declines from

non-OPEC countries, particularly from the US on-

shore lower-48 states, as well as in China, Mexico,

Brazil and Colombia. Meanwhile, OPEC crude oil and

NGLs output increased by 0.96 mb/d and 0.13 mb/d,

respectively.

Non-OPEC countries produced 57.34 mb/d of

liquids on average, indicating a decline of 0.66 mb/d

in 2016. In terms of breakdown, they produced 42.2

mb/d of crude oil, 7.7 mb/d of NGLs and 5.1 mb/d