* Shell says OPEC capacity worry to fuel oil price
* BP, Shell see lower products sales
* Refining use rates to stay low throughout 2011
By Dmitry Zhdannikov
LONDON, July 28 High crude prices have dented
global oil demand in the second quarter, oil majors said this
week, in a trend likely to be repeated in the second half of the
year if prices stay high.
Oil majors BP , Royal Dutch Shell (RDSa.L) and
ConocoPhillips all said they witnessed signs of demand
rationing in the second quarter, which saw Brent oil prices
LCOc1 spiking to $127 per barrel, close to their all-time high
Many analysts and fund managers say demand erosion will
ultimately help bring oil prices down if producing nations
cannot pump more to help support fragile world economic growth.
But Royal Dutch Shell's (RDSa.L) chief executive told
Reuters concerns over geopolitical tension in the Middle East
and falling output capacity will be supporting prices for the
"It (oil prices) is reflecting obviously today expectations
that demand will still go up and supply will be in a catch up
mode," Peter Voser told Reuters Insider Television.
"It also reflects that OPEC spare capacity is now below 2
million barrels (per day), according to the latest numbers, and
there are some geopolitical tensions in it," he said.
Shell said oil products sales volumes decreased by 8 percent
compared with the same period a year ago while, excluding the
impact of divestment, sales volumes were 4 percent lower than in
the second quarter of 2010.
On Tuesday, BP's head of refining and fuel marketing Iain
Conn said the firm's marketing volumes were down about 2 percent
in the second quarter year-on-year.
"This is a reaction to high prices. This is something we are
going to continue to see in Europe and the U.S.. East of the
Rockies retail volumes are down about 6 percent year on year...
Everywhere else were are seeing diminishment of demand," he
European oil consumption is set to fall to its lowest since
1995 this year as high prices cut sharply into fuel use in
debt-laden peripheral eurozone nations.
Efficiency gains have reduced European oil demand over the
past five years. Crude price changes do not normally have as
much impact on retail demand as in the United States because tax
in Europe makes up a much larger share of total fuel costs.
Some funds, including Investec, say the risks of demand
destruction in the United States are underestimated as gasoline
prices hover around a critical level of a tenth of personal
disposable income, after which demand destruction begins.
U.S. No.3 oil firm ConocoPhillips said on Wednesday
its U.S. refining crude oil capacity utilization rate was 90
percent and the international rate was 96 percent.
"We expect global refining capacity utilizations to be in
the low 90s in the second half of 2011," said Conoco's chief
financial officer Jeff Sheets.
Latest European data from Euroilstocks showed total refinery
production in 16 European countries was down 8 percent in June,
year-on-year, and refining utilisation capacity hovered at
around 80 percent compared with 87 percent last year
In China, which has been the engine of global oil demand
growth in the past year, implied oil demand rose 1.1 percent in
June from a year earlier, the slowest growth in more than two
years as Beijing's monetary tightening cut into oil use.
Developed consuming nations released emergency stocks last
month in a bid to cap oil prices and protect economic growth
although prices quickly returned to where they were prior to the
Voser said he did not support the release as the world
needed sustained new supply from places such as Iraq or the
"I don't believe in these measures. These are very
short-term measures and do not bring any medium and long-term
(Reporting by Dmitry Zhdannikov, additional reporting by Tom
Bergin, editing by Richard Mably)