Demand destruction continues to happen in crude oil in Asia, Europe and US markets and hence demand growth is expected to fall to 740, 000 barrels per day in 2012, the lowest since 2009, according to Bank of America Merrill Lynch (BofAML).
Global GDP growth is expected to be 3.3% in 2012 and leading indicators point to continued weakness in Oil demand this year, BofAML said.
Close down of crude distillation units (CDU)
In a depressed margin environment, oil refineries closed 3.4 mn barrels/day of crude distillation (CDU) globally since 2009. Inventories of petroleum products in the OECD are still too high and refining capacity utilization too low.
“Thus, we estimate that the refining complex will need to see the shutdown of at least another 2.0 million b/d of refining capacity before refinery utilization rates nudge back up towards the attractive levels seen between 2004-08. For this year, we could see at least another 420 thousand b/d of CDU capacity close. In the medium term, this figure could rise to as high as 3 million b/d, adding upside risk to utilization rates beyond 2012,” according to BofAML report.
BofAML added that gasoline cracks will remain subdued for rest of summer season, but distillates will fare better as utilization rates are higher than for gasoline. This is due to strong demand pull from emerging markets, with US exports of distillates to Latin America continuing to rise.
Source: Commodity Online