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Not so great lurker
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I found this article that blames China for the rise in oil prices.
http://www.forbes.com/business/energ...tr1368346.html
Quote:
China's oil thirst changes global flows
By Felicia Loo
SINGAPORE, May 12 (Reuters) - China's mighty thirst for oil, and healthy demand growth in Asia, is pushing up the price of spot barrels and changing traditional flows of crude and refined products across the globe, analysts say.
Middle East refiners are sending increasingly more oil products eastwards at the expense of supplying the West. Crude from South America, West Africa and Russia are regularly flowing to Asia in bigger volumes than before.
"China has become the arbiter of the marginal barrel of crude and gas oil, although they are not the biggest importer, it now sets prices," said Al Troner, director of Asia Pacific Energy Consulting based near Seattle.
"No matter how you cut it, China will be a major influence on global oil flows even if its oil demand grows by half of what forecasters are predicting," said Troner.
China overtook Japan last year to become the second biggest consumer after the United States, soaking up about 5.49 million barrels a day (bpd) of the world market of 78.66 million bpd.
This year, the International Energy Agency (IEA) expects China's consumption to jump almost 14 percent, or 750,000 bpd, to 6.24 million bpd. Some predict growth could be as high as one million bpd in 2004 and for the next two to three years.
DEMAND ACROSS THE BARREL
A shortage of electricity and massive infrastructure projects have sent use of fuel oil and gas oil (diesel) soaring. Imports of fuel oil are expected to hit record levels this year and since January, China has been a net importer of gas oil after being a net exporter for the previous five years.
"Though (China's) government tries to maximise diesel production by enhancing crude runs, there is a limit. Over a long time, China will become a net importer of diesel," said Wu Kang, a fellow at the East-West Center in Honolulu.
China is a growing net importer of jet fuel. Its gasoline exports have fallen sharply in 2004 from record highs last year as car sales keep double-digit growth, leaving buyers such as Vietnam, Indonesia and Australia to scramble for barrels.
Top Japanese refiner Nippon Oil Corp hopes to cash in on the China demand bonanza and triple fuel oil sales to 1.9 million tonnes in 2004 under term supply deals with Sinopec Corp, Sinochem Corp and trader China Oil.
Brazil's national oil firm Petrobras is expected to sign this month a cooperation deal for term oil products with Sinopec in what would be the first oil sales link between the countries.
Most of the extra demand is driven by China, but continued restructuring in Asia's refining sector after almost a decade of chronic overcapacity and low margins is also making a difference.
Asia lost 346,000 bpd of refining capacity in 2003 after plants in Australia, Japan and the Philippines shut. Japan also has unscheduled closures at two plants with a combined 333,000 bpd of capacity after fires.
"China has created a different balance in the region and this is being amplified by growth in other countries and refinery closures. It's all creating a tighter environment, especially in gasoline and gas oil," said Lawrence Eagles, senior analyst at the Paris-based IEA.
Some European refiners received a boost to profits earlier this year as high gasoline prices in Asia pulled barrels from Europe, a rarely seen arbitrage play.
CHANGE IN SEASONAL PATTERNS
Frederic Lasserre, head of commodities research at Societe Generale, said rising Asian consumption was smoothing out traditional peaks and troughs in demand in the European and North American markets.
Consumption in the northern hemisphere normally spikes in the winter and summer months when demand for heating fuels and for motor fuels peak. Asia's demand is less seasonal.
"The impact of Asian demand is not just on prices, it's a complete change of flows. This has clearly modified seasonality on a global basis, which is why we have not seen a drop in second-quarter demand this year," said Lasserre.
Benchmark oil prices have stayed strong this year and hit 13-year peaks at over $40 a barrel in May. This is partly due to strong Asian demand, but also because of low gasoline stocks in the United States and fears of disruptions to oil flows from the volatile Middle East, home to two-thirds of global reserves.
Much of the Middle East's exports of middle distillates go to Asia, leaving European refiners to cover requirements in the Atlantic Basin -- Europe, the Mediterranean, Africa, Latin America and, at the margin, even the U.S. market, Lasserre said.
Asia's dependency on Middle East supplies is reflected in a tendency for Asian refining margins to spike during periods of maintenance at plants in the Middle East Gulf.
"It shows the importance of certain marginal products imports into the region, for example naphtha," said the IEA's Eagles.
Asia also takes almost 80 percent of its crude imports from the Middle East, mostly under term agreements.
But again, the impact of growth is causing competition as Asian refiners look to diversify crude sources. Asian, North American and European refiners are battling for light crudes, especially from Africa, pushing up price differentials and increasing price volatility, said SG's Lasserre. (Additional reporting by Jonathan Landreth and Tanya Pang)
Copyright 2004, Reuters News Service
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