Analysis: Demand Growth May Beat Forecasts in 2026


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Global economic data showed an uptick in December that could 
continue, potentially altering the demand dynamics for the oil market which 
could see a softer landing versus the profoundly bearish picture anticipated 
earlier.

   While many forecasting agencies predict a sizable oversupply for 2026, 
recent macroeconomic releases are beginning to challenge this bearish demand 
sentiment due to improving demand statistics from the East to West.

   This year's anticipated crude price drop -- the U.S. Energy Information 
Administration's Short Term Energy Outlook for February forecasts an average 
2026 WTI price of $53.42 bbl versus the 2025 average of $65 -- could also shift 
from evolving demand.

   Aside from the tensions over Iran that drove WTI to seven-month highs of 
more than $67 bbl this week, steady economic growth could underpin the demand 
required to keep oil above the price lows forecast for this year.

   Manufacturing Rebound

   Most models previously predicted minimal growth in petroleum fuel 
consumption for the U.S. and Europe due to engine efficiency gains and 
increasing use of biofuesl and electric vehicles. However, recent manufacturing 
data revealed a surprising pickup in activity that could counteract the 
expected decline in diesel and gasoline demand.

   The Institute for Supply Management's latest U.S. manufacturing PMI showed 
the sector expanded in January at its fastest pace since 2022. This reading 
surpassed the 50-point mark for the first time in a year, signaling a 
definitive shift from contraction to expansion.

   The Federal Reserve, meanwhile, reported that U.S. industrial output 
increased 2.3% year-on-year in January, the strongest annual expansion in close 
to four years.

   Elsewhere in the West, the Eurozone manufacturing PMI rebounded to 50.8 in 
February, marking the strongest improvement for the region since June 2022. 
Business sentiment reached a four-year high as new orders increased at the 
fastest pace seen in nearly four years.

   Global trade forecasts are also shifting after the U.S. Supreme Court struck 
down the administration's use of emergency powers regarding high tariffs. The 
replacement of these tariffs with a flat 10% fee may reduce the trade strains 
previously baked into demand models. Lower trade barriers typically stimulate 
global shipping and freight activity, directly boosting demand for middle 
distillates and bunker fuels used in international commerce.

   Asian Momentum

   Leading petroleum demand in Asia was China, where factories picked up steam 
at the end of last year, boosting industrial production 5.2% year-on-year in 
December for the fastest growth since September.  The RatingDog (formerly 
Caixin) manufacturing PMI also regained momentum from below 50 in November to 
reach 50.1 in December and 50.3 in January.

   Prior to that, the Chinese economy had struggled to definitively break from 
the prolonged pandemic induced shutdown. High levels of debt, lacking fiscal 
stimulus and slowing demand growth in its largest export markets hit the brakes 
on Chinese growth long before the resumption of its trade war with the U.S. 
following the reelection of Donald Trump as president.

   Chinese crude oil imports and refining activity surged to record highs in 
2025 after a brief retreat during the previous year.

   Sans Chinese growth which once dominated Asia and much of the world, India 
has taken the spot of the fastest-expanding major economy, with annual growth 
in industrial production at a two-year high of 7.9% in December. India's 
National Statistics Office has also revised GDP growth projections higher to a 
range of 7% to 7.4% for the 2026/27 period, from a prior 6.8% to 7.2%.

   That's not all. Modelers expect Asian economies excluding China and India to 
drive a substantial portion of global demand growth through the next two years. 
OPEC attributes a fifth of global growth to these nations, calling for a 
270,000 bpd increase.

   Despite the higher demand, global supply additions are still poised to 
outpace even the most bullish forecasts due to unexpected price rises. Global 
inventories will likely continue to swell, though the pace may be much slower 
than the current consensus suggests.




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