In the
recently released International Energy Agency (IEA) medium-term outlook,
the agency forecast global oil demand will rise from 96.6 mill barrels
per day last year to 103.8 mill barrels per day by 2022.
This demand growth will mainly come from non-OECD counties, as the
forecast oil demand growth for these counties, according to the report,
is expected to rise by 8.5 mill barrels per by 2022, while in contrast,
OECD demand is expected to decline by 1.2 mill barrels per day over the
same period, Gibson Research said analysing the report.
More efficient oil use and the shift towards alternative energy sources
are cited as part of the reasons behind the slower demand growth. So
effectively, the bulk of future oil demand will continue to come from
the Asia/Pacific region.
IEA estimated that Asian crude demand will increase by around 5 mill
barrels per day by 2022. Over the past few years, Asian crude producers
have experienced a continual decline in domestic production, in part due
to the low oil price environment (cheaper to buy on the international
market), as well as depleting oil fields and lack of fresh investment.
The latest analysis said that this situation is unlikely to change in
the foreseeable future. Research pointed towards further downwards
pressure on Asian oil production, which is set to fall by more than
600,000 barrels per day by 2022, an equivalent of 1% of global oil
demand. Half of this production decline is accounted for by the largest
producer, China, but many fields are mature, drying up and extraction is
becoming more expensive.
According to the IEA, Chinese production has reached its lowest level
in nearly a decade and shows no sign of recovering. The report predicted
a drop to 3.7 mill barrels per day by 2022, compared with 4 mill
barrels per day in 2016.
The situation is the same for other Asian countries. By 2022, the IEA
believed that in addition to Chinese losses, other Asian producers will
see a 410,000 barrels per day drop in production with the biggest
decline from Indonesia (falling by 125,000 barrels per day). Smaller
losses are forecast for Malaysia, Thailand, Vietnam and India over the
outlook period, but nevertheless adding to the picture. Of the Asian
producers only Australian production is set to grow.
This situation could provide support for the crude tanker market in the
medium-term, in particular the VLCC sector. The IEA report claimed that
not all the additional barrels will be met by Middle East producers, as
more production will be absorbed by the local refiners. Consequently,
barrels will have to be sourced from other regions including the US,
Gibson said.
Other developments in the Asian region include expanding refinery
capacity, which will naturally require feedstock whether sourced
domestically or otherwise. An illustration is the 200,000 barrels per
day Vietnamese Nghi Son refinery expected to receive its first shipment
of crude in May. Nghi Son is 35% owned by Kuwait Petroleum and will
eventually produce 8.4 mill tonnes of product annually meeting around
40% of growing domestic demand.
These developments will support long-haul crude trades but could impact
on the short-haul Aframax market in north Asia, which are already being
impacted by pipeline developments. In addition, new refinery
developments may support the crude import sector but could compete with
long haul product flows into the region.
As the tanker market starts to feel the impact of the recent OPEC
agreement, the industry continues to seek some good news to boost
spirits, Gibson concluded.
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