Asian oil demand rally seen beginning in 1999
Asian oil demand rally seen beginning in 1999
LONDON (Reuters): Battered Asian oil demand will start a slow
recovery next year but could still fall just short of the pre-
financial crisis levels of 1997, a Reuters survey of analysts
found.
The poll of eight industry experts found that this year's
unprecedented downtrend would give way to mild gains in 1999 and
2000 but nothing like the growth of previous years.
An average of the eight forecast Asian oil demand at 19.65
million barrels a day (bpd) in 1999 from 19.33 million bpd this
year, reversing most of the 2 percent decline from 19.71 million
in 1997.
Before this year's financial crisis the region, worth about a
quarter of world demand, had contributed nearly 50 percent of
annual global growth in crude demand.
Analysts said economies hard hit by plunging currencies will
find the road to recovery a steep upward struggle with demand in
North Asia which accounts for nearly half of Asia Pacific demand,
likely to contract by about 10 percent this year.
"Asia is stuck in a structural economic crisis and the
prospect is very worrying with Japan, Asia largest consumer still
in recession and China's current restructuring, " said Gundi
Royle, director of oil and gas research at Deutsche Morgan
Grenfell in London.
"For the oil market, Asia was the engine that drives world oil
demand up because it constitutes half of world oil growth," said
Irene King at JP Morgan in New York who also projected a modest
upturn next year.
"1999 will not be a return to the glory days before the crisis
but things should look slightly better," she said.
Paul Cheng, an analyst at Lehman Brothers in New York saw
Asian oil demand hitting a floor in the first quarter of next
year and picking up only in the fourth quarter.
"Under normal weather conditions, demand should pick up in the
last quarter of the year. Economic growth for the rest of Asia is
likely to be flat between 1998 and 1999. China and India will
probably grow about five percent in the same period," he said.
"By the year 2000 or even late 1999, the Asian economy should
rebound and we should see stronger growth," he added.
Asia's fall in oil demand has been cushioned this year by
cheaper prices, analysts said.
"Consumption was not curtailed as much as it would have been
as oil has become cheaper at least in the first six months of
this year," said John Toalster at Societe Generale in London.
Asian currencies, excluding China have fallen by an average of
34 percent since last July with the Indonesian rupiah leading the
losers, down 77 percent. Thailand's Baht has fallen by almost 34
percent followed by the South Korean won which has dumped
39.percent.
Asian GDP without China has contracted by an average of 3.75
percent with Malaysia, Indonesia, South Korea, Philippines,
Thailand, Hong Kong and Japan registering negative growth,
according to a recent Reuters market survey.
But Asian refiners lost purchasing power on the dollar-
denominated oil market has partly been compensated for by the
slide in world oil prices.
Benchmark Brent blend crude has averaged less than US$14 a
barrel so far this year compared to $19.30 in 1997.