Asia vulnerable to oil supply disruptions: IEE

Asia vulnerable to oil supply disruptions: IEE

TOKYO (Reuters): Energy-hungry Asian countries remain vulnerable to possible oil supply disruptions with their stockpile levels far less than those in developed nations, an energy think tank said yesterday.

"Most Asian countries have little more than running stocks held by refiners when it comes to oil stockpiles, let alone national strategic stockpiles," said Ken Koyama, senior economist at the Institute of Energy Economics (IEE).

Koyama spoke to reporters regarding a recent IEE study on energy security in seven Asian economies: China, South Korea, Taiwan, Singapore, Thailand, the Philippines and Indonesia.

Among the seven nations, South Korea is the only one holding national stockpiles, while China and Singapore do not even require oil firms to maintain a certain amount of stocks for emergencies, he said.

Stockpiles in China are estimated to cover only 20 days of domestic demand, the lowest level among the seven countries.

The oil stockpiles of member nations of the Organization for Economic Cooperation and Development (OECD) on average cover 89 days of domestic consumption.

Taiwan and South Korea maintain relatively high stock levels, reflecting concerns over energy security amid ongoing tensions with neighboring countries, Koyama said.

Taiwan maintains oil stockpiles covering 60 days, while South Korea's stockpiles, including both national stockpiles and those held by oil firms, amount to 53 days of domestic consumption.

Oil stocks in Indonesia, Singapore and Thailand total 34, 35 and 36 days of consumption, respectively, while the Philippines holds a 50-day supply of oil stocks, he said.

Japan, which imports more than 99 percent of its domestic crude oil needs, keeps about a 156-day oil stockpile, equally divided between national stockpiles and private stocks held by oil firms.

Although Asia is one of the world's fastest growing areas in terms of oil demand, oil production in the region has been stable, raising its dependence on oil imports from the Middle East.

London

Meanwhile, oil markets opened higher in nervous early trade in London yesterday after the United Nations Security Council late on Wednesday condemned Iraq's decision to bar Americans from U.N. weapons inspections teams.

Warning of "serious consequences" the 15-member Council late on Wednesday demanded that Iraq cooperate fully with the U.N. special commission (UNSCOM) set up after the Gulf War to eliminate Iraqi weaponry.

London December futures for benchmark Brent blend opened 16 cents higher at $19.94 a barrel.

The U.N. warning followed an ultimatum from Baghdad giving Americans in the U.N. arms team in Iraq a week to leave the country.

UNSCOM immediately suspended all field operations in the country, such as inspecting sites, but continued other duties.

The escalating tension triggered renewed concerns among oil dealers that Baghdad might decide not to renew crude exports under the U.N.'s oil-for-food exchange when the deal comes up review in December.

Oil traders and analysts remained skeptical and feared escalating tensions might put a halt to the oil sale program.

"At the moment the chances are the oil-for-food deal will get renewed," said Mehdi Varzi, oil analyst at Dresdner Kleinwort Benson Securities in London.

At stake for world oil markets are about a million barrels daily of Iraqi sales in the special oil-for-food arrangement aimed at getting food and medicine to Iraq's poor.

Amid booming oil winter demand a reduction in supply of that stature could send crude spiraling, even though Western stocks of oil are comfortable, dealers said.

"That would be serious for the market and could lead to a rise of $2 or $3 a barrel," said oil analyst John Toalster at Societe Generale in London.