Rising oil prices may threaten Asian demand
Rising oil prices may threaten Asian demand
LONDON (Reuters): Oil analysts expect Asian oil demand this year to return to the levels seen before last year's financial crisis but runaway oil prices are threatening to stifle the recovery, industry experts said.
A survey of eight consultants and the International Energy Agency projects Asian oil demand averaging 19.74 million barrels per day (bpd) this year up just 370,000 bpd from 1998 when demand slumped for the first time in decades.
Asian petroleum consumption in 1997 hit 19.77 million bpd after many years of high growth which provided the lion's share of incremental demand for global oil exports.
The poll forecasts demand growth accelerating by 510,000 bpd in 2000 to reach 20.25 million bpd.
The latest projections for 1999 and 2000 show higher forecasts than in a similar survey carried out by Reuters in February but some analysts remained cautious.
They said the speculator rise in oil prices to $23 for benchmark Brent this week from less than $10 a barrel in February would slow economic recovery in the region.
"Rising oil prices will nip the bud of recovery," said John Walterlow, head of downstream oil at Edinburgh's Wood Mackenzie.
"High oil prices may stall recovery," added Irene King of JP Morgan in New York.
Dollar-denominated oil import bills are ballooning especially for big oil users like Japan, China and India. A softer U.S. dollar has provided little help, analysts said.
Half of those polled expected oil consumption in Asia this year to stay below pre-financial crisis levels, saying that the rate of growth has so far been slow and will unlikely match those seen before the crisis.
"We should see robust growth this year but the rate of growth will not match what we saw back in the mid 1990s," said Ken Miller, an energy specialist at Purvin and Gertz in Houston.
Deborah White, an analyst at the Paris-based International Energy Agency (IEA) said world demand growth this year will still be dominated by North America and only in the year 2000 would the focus return to Asia.
Analysts were cautious about Japan, Asia's largest oil consumer where state planners grappling with economic malaise would prefer to spend less on buying oil.
The latest IEA data projects demand in Japan averaging 5.59 million barrels per day in 1999 with demand picking up only in the first quarter of this year.
Asia's other oil giant, China is also expected to show some growth this year with projected demand rising by 3 percent compared to pre-Asian financial crisis levels of 8-9 percent.
South Korea would provide most growth by percentage with an extra 110,000 bpd to 2.05 million barrels per day, the IEA said. India would also suck in extra supplies to feed economic growth of about 6 percent.
The rest of Asia is expected to increase demand by between a marginal 1 percent to 2 percent with a downside risk was now placed on Indonesia as political uncertainties in East Timor grow.
The latest IEA data showed demand in Thailand still falling in 1999 by 1.3 percent after a dramatic slide of 7.4 percent last year.