Business
Emerging Economies Upend Global Oil Demand
By Javier Blas, FT, 20 August 2010
Aug 22, 2010 - 8:05:26 AM

Emerging economies have upended the long-standing pattern of global oil consumption, according to the west's energy watchdog, in a further sign of how countries such as China and India are transforming commodities markets.

The International Energy Agency estimates that oil demand was higher this year during the second quarter for the first time, at about 86.6m barrels a day, ahead of the traditional peak winter season of January-March, at 86.0m b/d.

The traditional seasonal pattern had usually pushed up oil prices during the northern hemisphere winter, before warmer temperatures cut consumption.  But with growing demand for oil coming from countries such as China, India, Saudi Arabia, Brazil and Indonesia, seasonal patterns are changing, a trend the Paris-based IEA believes will accelerate.  The IEA said: "This emerging seasonality will probably raise new refining and logistical challenges."

In the past, oil demand fell 1.5-2.0m b/d between the first and second quarters, allowing refineries to undergo maintenance.  Low demand periods helped to build inventories to meet peak consumption later.

By contrast, economic activity in many developing countries tends to slow in the first quarter after the new year's celebrations - most notably in China, where the lunar new year occurs in January-February - before rebounding, according to the IEA.  As a result, oil consumption is lower in the first quarter and rises sharply in the second.  The trend is markedly different from most rich countries.

"Given that non-OECD demand is now driving global growth, it is also starting to alter the world's oil demand seasonality," the agency said in its monthly report.  "Eventually, as non-OECD oil demand overtakes OECD consumption over the next few years, the first quarter may come to feature the lowest demand level within any given year."

Some analysts said that although the seasonality had begun to change, the IEA had gone too far in predicting that consumption patterns had changed for good.  They also noted current seasonal data were obscured by the economic crisis.