Slump in car sales depresses Indian oil demand

Crude oil processed in India fell 4.5% on year to 4.43 million barrels per day in January, according to the Ministry of Petroleum and Natural Gas. It was the fifth consecutive month of year-on-year decrease.

However, Indian electricity supply in the same month rose 5.7% from a year ago, recorded seventh months consecutive increase. Entire energy demand in the country seems not shrink.

The cause of the slowing down of petroleum demand in India is estimated to be the slump in automobile sales.

Indian passenger car sales in 2013 fell 9.6% on year to 1.81 million units due to rising fuel prices and high interest rates. It was the first annual sales decrease since 2002.

Passenger car sales in January also slipped by 7.6% from a year ago to 160,289 units, according to the Society of Indian Automobile Manufacturers. Consumers in the nation are very reluctant to buy cars.

The sluggish petroleum demand in India, however, is unlikely to depress the global crude oil market, since estimated main part of the near term growth of world petroleum demand has already shifted from the emerging market to advanced nations.

Half of Japan's thermal power capacity exceeds useful life

Japanese people are discussing about the resumption of nuclear plants after the result of last week's Tokyo gubernatorial election and the Chubu Electric Company's application for a state safety assessment of the No. 4 unit at its Hamaoka nuclear power plant.

Fears of electricity supply shortage encourage people who support the resume of nuclear units.
Kansai Electric Power Company has been spending the first high electricity demand season without nuclear units. Although the company had expected a very severe situation, its spare supply capacity has been secured enough. KEPCO's spare capacity slipped below the 8% of stable level only once since the beginning of this winter. Meanwhile, Tokyo Electric Power Company's spare capacity has dropped below 8% four times in this season. However, both two major power companies have not recorded less than 5% of spare capacity.

One of the major reasons why Japanese utility firms have avoided the critical situation is declining electricity demand in the country. Efforts of saving power and changes of industrial and social structures have cut Japan's power consumption. Electricity demand in the nation basically has shown year-on-year decrease after the severe earthquake in March 2011. The tendency is likely to continue.

On the other hand, people who request the resume of nuclear units often mention about the overuse of aging thermal power units.

Utilization rates of thermal power units by Japanese electricity companies have increased from around 40% to about 60%. It rises toward 70% during the high demand season.

Generally speaking, the 60% utilization rate is not much high. But thermal power units in Japan had been used to make up the demand gap between day time and midnight. Therefore, power companies do not have enough system to maintain high utilization rates at thermal power units for long hours.

Moreover, thermal power units that account for about half of entire thermal power generation capacity in Japan have more than 30-years age. Units that account for 20% of the total capacity have more than 40-years age. Those units seem to have exceeded their useful life.

The serious power supply shortage caused by accidents at thermal power units might be seen in Japan in the near future. Power companies need to replace their aged thermal power units urgently or to resume nuclear units.

Will US petroleum exports rise further?

Petroleum exports by the United States posted another record high in December. Petroleum exports from the country have renewed historical records frequently in the past several months.

Petroleum exports and domestic crude oil production in the U.S. show steady upward trends apparently in contrast with the shrinking of petroleum imports.

The petroleum demand in the U.S. has peaked out in mid-2000s. Meanwhile, increasing domestic crude oil production that is boosted by the shale revolution has reduced crude oil imports into the U.S. and made the region’s crude oil prices cheaper than international markets. Lower crude oil prices led U.S. petroleum products exports more competitive.

However, petroleum demand in the U.S. has been recovering since the second quarter of 2013. The U.S. Energy Information Administration forecasts that the country's petroleum demand could be firmer towards the end of 2015.

Keystone pipeline has started operation of its extension part towards the Gulf of Mexico, it is likely to ease the high crude oil stockpile level in the U.S. Midwest. The discount of the U.S. crude oil against the European benchmark is also expected to shrink.

Therefore, EIA does not predict that the U.S. will export petroleum at far above 2 million barrels per day level over the next 2 years. Further breaking record of export might not be seen in the near future.

In the U.S., the cancellation of crude oil export ban is being discussed aggressively. The country has prohibited export of domestic produced crude oil since 1975. But current supply and demand situation suggest that crude oil export might not begin significantly even if the U.S. government lifts the ban.

On the other hand, the resume of crude oil export may push U.S. crude oil prices up towards international prices. It could accelerate conversion of energy use to natural gas in the country.

China's shale gas production is surging, but...

Chinese National Energy Bureau expects that the country will produce 1.5 billion cubic meter of shale gas in 2014. It is more than 7 times amount of last year's production. China only produced 25 million cf of natural gas in 2012, but the current rapid growth of production is likely to raise the output to 6.5 bcm in 2015.

However, the growing shale gas output is still ignorable levels, since total natural gas production in China was 107 bcm in 2012. Shale gas production in China can not make up for the slowing down of total gas output.

In the United States, shale gas production already accounted for 35% of total natural gas supply in 2012.

In China, the growth of conventional gas production is not able to catch up with the increase of consumption. In addition, the growth of shale gas output is not enough. Therefore, imports are surging especially in 2010s.

But China's annual natural gas imports were equivalent to 3.2 million tonnes of liquefied natural gas in 2012. Japan imported 87 million tonnes of LNG in the same year. The huge difference suggests that severe competitions between China and Japan over the procurement of natural gas are unlikely to be seen in the near future.