Even if WTI (West Texas Intermediate, set in New York) and Dated Brent (set in London) may offer the impression that the US and Europe are rulling the energy game, that doesn’t really tell the story, writes Kent Moors for oilandenergyinvestor.com.
And analysts are finally coming to understand that the true price of oil is no longer determined in the West.
The so-called “mature,” developed, economies may still hog oil finance (at least for the time being), but the region driving demand for the actual crude, and the products derived from it, lies elsewhere…
And no, it’s not China, but Asia. All signs indicate that overall aggregate energy demand, and crude oil in particular, will gravitate to Asian markets for at least the next 25-30 years.
The International Energy Agency (IEA) projects that global demand for the fourth quarter of this year will come in at 96.9 million barrels a day, a 2.3% increase over the 2015 annual average and 3.5% more than the figure for the first quarter of last year. The preliminary forecast for the fourth quarter of 2017 is put at 98.1 million barrels a day. That would be a 2.1% increase over 2016 daily averages.
Both of these figures are the highest ever recorded.
Asia currently accounts for a full third of the worldwide total, and that’s just the beginning… Demand there is set to rise quicker than in any other place on Earth. While demand figures are expected to languish for North America and Western Europe, initial indications point toward Asian demand accounting for 40% of the total by 2030.
The two dynamos driving oil prices will both be Asian. Any cooling off of the Chinese expansion will be offset by the accelerating rise in Indian demand.
India is the new China. Helima Croft, managing director and Global Head of Commodity Strategy at RBC Capital Markets laid it out.
“We think India is roaring right now and will be a key driver of demand,” Croft told CNBC. While RBC sees continuing choppiness in the crude market, its analysis also points toward a balancing of supply and demand by the end of this year, and slowly rising prices.
Last week as well, the IEA reported that oil demand in India had just grown faster than any other three-month period over the past 10 years.
Meanwhile, according to the Indian Oil Ministry’s division of Petroleum Planning and Analysis, the country used 48.5 million tons (about 369 million barrels) of oil products during the quarter beginning April 1, a hefty 7.8% increase year-on-year.
This is the highest spike in Indian oil demand since an 8.4% rise for the first quarter of 2007, and the first time that the country has exceeded a 4-million-barrel-a-day consumption average.
The IEA put improving individual disposable income levels and a rise in infrastructure spending as the reasons.
The combined demand increase for these two countries alone is estimated to account for almost 50% of the entire global demand growth by 2035. And the two countries must be followed closely.
Sursa: oilandenergyinvestor.com