Chinese and U.S. demand for petrochemicals will drive the global demand for oil next year, expert said on Monday at the three-day Gulf Petrochemical and Chemical Association Forum.
Demand for oil in China and the U.S. is expected to continue to grow next year, Vice President of Refining and Chemicals at research firm Wood Mackenzie Alan Gelder said, "and globally, we see 3.5 percent growth for petrochemical products in 2018."
The growth of oil-related manufacturing like the production of ethane and propane, which are basic materials for plastic, was the main driver for the demand of the "black gold."
A dip in demand for oil as seen in the third quarter of 2017 "was a one-off mostly driven by Hurricane Harvey which hit demand for petrochemicals in the United States," Gelder added.
Harvey lasted from Aug. 17 to Sept. 3 in the southwest of the United States and was, with 200 billion U.S. dollars in damage, the costliest storm on record, topping Katrina from 2005.
Gelder also mentioned that the slight slowing down of China's economic growth, saying it "does not mean China's economy is declining, in fact it keeps growing."
Asia's oil demand growth remains strong, and more balanced between gasoline and diesel/gas oil, said the analyst. Earlier in October, the International Monetary Fund raised its forecast for China's economic growth in 2017 and 2018, saying the Chinese economy would climb 6.8 percent this year and 6.5 percent next year, both 0.1 percentage point higher than its previous forecast in July, citing the stronger-than-expected performance in the first half of the year and continuous policy support.
Nevertheless Wood Mackzenzie does not expect the price of oil to rise sharply, but it anticipates Brent to trade at 65 dollars per barrel by 2020, despite the agreement between OEPC and Russia to cap production to lift the price.
"That is because OPEC (the Organization of Oil Exporting Countries) members Libya and Nigeria increase their production levels which mitigate OPEC and Russian production restraints, albeit OPEC adherence to cuts was strong in the first half," Gelder pointed out. Currently, Brent trades around 60 dollars per barrel.
On Nov. 30, the 14 OPEC members will gather for their 173rd ordinary meeting and their third OPEC and non-OPEC ministerial meeting at the cartel's headquarters in Vienna, Austria.
On the top of the agenda is the discussion point whether the 14 OPEC member states and the 11 non-OPEC members led by Russia will extend their pact from January this year to cut oil production by a combined 1.8 million barrels per day in order to squeeze oversupplied global stockpiles and thus to lift prices. The agreed production volume of oil was set at 32 million barrels per day since then.