BEIJING: The head of BP’s trading arm in Asia said global oil consumption led by China is helping to reduce excess crude stockpiles and alleviate pressure on a market now into its third year of a downturn. “The market is in rebalancing mode,” said Janet Kong, speaking at the FT Commodities Asia Summit in Singapore on Monday. “We are at a juncture where we are going to see continued inventory draws.”
“China has helped to clean up the market,” she said, referring to a rise in imports this year as the country builds its strategic petroleum reserve, which Beijing has been growing to cushion the world’s second-biggest economy from future energy shocks. Ms Kong said the construction of storage tanks by private players, not just the government, would help to support demand. “Emerging markets are back in the driving seat,” she said adding that over the past year consumption had been bolstered by gasoline demand in industrialised nations. Her comments come as concerns have mounted that any slowdown in Chinese buying, as the government seeks to tackle overcapacity in the refining sector, could release hundreds of thousands of barrels of crude into the market. It is a valid fear as China’s clout over the global oil market has grown. Its consumption has surged and it now imports about 8m barrels a day. China is on pace to overtake the US this year as the world’s biggest oil importer.
Chinese demand will be in focus as the global oil trading community flocks to Singapore this week for the annual Asia Pacific Petroleum Conference. Ms Kong said Opec-led efforts to cut production and bolster the market were also helping to accelerate a market rebalancing. She said with cartel kingpin Saudi Arabia planning to list shares in its state oil company next year, global producers should maintain coordinated efforts to keep prices in check and ensure the highest possible valuation. Brent crude, the international benchmark, traded around $56 a barrel on Monday – the highest since March. Saudi Arabia, she said, was “on a bit of a knife edge” as despite signs supply and demand were coming into balance and a recent uptick in prices, the market could still “go either way”. “It will be a difficult story to sell if the market is still in a glut”.
