By Brai Odion-Esene

WASHINGTON (MNI) – The American Petroleum Institute’s chief
economist remains confident global oil consumption will continue to
grow, driven by rapidly expanding developing nations, even as data
Friday showed U.S. oil demand fell by a massive 5.9% on an annual basis
in December.

Asked by Market News International during a conference call with
reporters to comment on issues likely to impact oil demand and supply in
the first quarter of 2012, the API’s Jon Felmy noted demand has
continued to grow worldwide.

The International Energy Agency Wednesday forecast global oil
demand growth of only 1.1 million barrels per day in 2012, down from 1.3
million bpd in their December forecast.

“An exceptionally precarious economic backdrop in the fourth
quarter of 2011 saw oil consumption return to a declining trend,” the
IEA said.

Felmy said despite the revision, an increase in demand is still
expected primarily because of developing nations such as China and
India.

“It looks like even though the U.S. has lower demand growth, those
countries are stepping in with growth,” he said.

So Felmy is confident on the demand side, unless a scenario in
which an economic collapse occurs — perhaps due to the still to be
resolved Eurozone sovereign debt crisis.

The API Friday estimated December’s petroleum deliveries in the
United States, a measure of demand, showed the largest drop in 2011,
falling 5.9% from the prior year to average 18.6 million bpd, a 15-year
low for the month of December.

Domestic deliveries averaged 18.9 million bpd in 2011, a drop of
1.2% from 2010. For the fourth quarter, domestic deliveries were down
0.5% from the same period in 2010.

Although there have been some positives on the supply side, Felmy
noted there are uncertainties involved in terms of political instability
in key regions around the world.

“The Middle East is always a concern … Nigerian strikes were
averted but is something that is a challenge in terms of short-run
supplies, and then of course there’s all the wild cards that happen on a
given year,” he said.

These could come in the form of hurricanes and other types of
disruptions, Felmy added.

Despite the decline in demand for refined products, the API
estimated the supply remained ample: gasoline production in 2011 was a
record high averaging 9.1 million bpd, 0.5% higher than the 2010
average.

The refining sector is under great pressure as a result, Felmy
said, with declining demand but record production of gasoline putting
refiners’ margins under pressure.

“It’s a classic case of strong supply, weak demand,” he said.

Married with higher crude oil prices, he predicts that as refinery
companies report their earnings over the next couple of weeks, “some
refiners are likely not to do very well, especially if you happen to be
refining crude oil tied to Brent.”

** Market News International Washington Bureau: 202-371-2121 **

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