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Shell market overview

Hydrocarbon Engineering,

Global economic growth

  • According to the IMF, global economic growth was 3.3% in 2014.
  • The IMF estimated that the eurozone’s GDP grew by 0.8% in 2014. US growth was 2.4%. Chinese growth slowed from 7.8% in 2013 to 7.4%.
  • The average GDP growth rate for emerging markets and developing economies fell to 4.4%.
  • Growth in 2014 fell short of the IMF’s forecast of 3.7% made at the beginning of 2014.
  • The IMF expects global economic growth to rise to 3.5% in 2015, but that would still be less than the annual average of 3.9% for the previous 10 years.

Global oil and gas demand and supply

  • Global oil demand rose by 0.7% in 2014, according to the IEA.
  • The IEA repeatedly revised down its oil demand growth estimate for the year from 1.4 million bpd in early 2014.
  • Demand grew in emerging economies, while remaining almost flat in advanced economies.
  • Shell estimate that global gas demand grew by approximately 1% in 2014, which is much lower than the average annual growth rate of approximately 2.5% in the past decade.
  • Shell believe that most of the growth in demand was in China and the USA, driven by power generation and industrial sectors.

Crude oil and natural gas prices

  • Looking ahead, substantial price volatility can be expected in the short to medium term.
  • Oil prices may strengthen if the global economy accelerates, or if supply tightens as a result of a deceleration in non-OPEC production growth due to current price weakness, in particular US light tight oil, or if supply disruptions occur in major producing countries.
  • Oil prices may weaken further if economic growth slows or production continues to rise.
  • Unlike crude oil pricing, which is global in nature, gas prices vary significantly from region to region.

Refining and petrochemical market trends

  • Industry refining margins were higher on average in 2014 than in 2013 in the key refining hubs of the USA and Singapore and were little changed in Europe.
  • In 2015, increased demand for middle distillates is expected to be a key driver of refining margins, supported by demand for gasoline in the middle of the year.
  • The overall outlook remains unclear due to continuing economic uncertainty, geopolitical tensions in some regions that could lead to supply disruptions and overcapacity in the global refining market.
  • The outlook for petrochemicals for 2015 is dependent on the growth of the global economy, especially in Asia, and developments in raw material prices.

Edited from report by Claira Lloyd

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