RIYADH: Asian consumption of gasoline and other fuels has beaten expectations due to demand stemming from structural changes in the economies of Asia’s biggest oil users, vindicating for now OPEC’s decision six months ago to keep its taps open.
Saudi Arabia’s oil minister in November persuaded fellow OPEC members to refrain from cutting their crude production quotas, arguing that demand would ultimately pick up and prices recover. The strength of recent demand for oil has surprised everyone, including OPEC, researchers at independent research consultant Energy Aspects said this week.
The Organization of the Petroleum Exporting Countries is meeting in Vienna on Friday in its first gathering since last year. The 12-member cartel is widely expected to maintain its quotas, with Brent crude up 40 percent since January. Some observers say OPEC’s policy hangs in the balance, and would be untenable if a strong crude rally wipes out refining profits or if Asian economies slow further by the year-end.
For now, traders say that is unlikely as fuel demand from China and India is bullish. While China’s overall economy has slowed, the country’s coastal and interior provinces are still expanding due to state and private-sector investment. India, Asia’s third-biggest economy after China and Japan, has embarked on an industrialisation drive under its reformist Prime Minister Narendra Modi, propping up fuel consumption.
“Preliminary estimates for April Chinese apparent demand indicate growth was 7.5 percent, comparable to first-quarter 2015 levels,” JP Morgan said in a report. “Similarly, Indian demand growth for April is reported at near 9 percent, ahead of our forecasts and the first-quarter 2015 growth rate of 4 percent.”
JP Morgan said gasoline and jet fuel will continue to underpin the above-trend expansion in oil demand.
Even in debt-shaken Europe, fuel consumption growth is near 30-year highs. Goldman Sachs said demand increased 7.2 percent in the first quarter from a year earlier, and expects growth of 3.5 percent for the rest of 2015.
Global gasoline demand is expected to rise about 500,000 barrels per day (bpd) in 2015, equivalent to 2 percent of global demand, and 400,000 bpd in 2016, according to JP Morgan.
High fuel consumption is helping to contain a global glut in crude that has left millions of barrels stored on tankers without a buyer.
