China, India, Japan Hamper Asia Oil Demand Growth
As the global oil market frets about a stubborn supply
glut, faltering demand growth in key Asian crude importers
is further hampering efforts to restore market balance.
A fuel glut in China, a hangover from demonetisation in
India, and an ageing, declining population in Japan are
holding back crude oil demand growth in three of the
world's top four oil buyers.
The three countries make up a fifth of 97 million barrels
per day (bpd) in global oil consumption, and any hiccups
among them will mean lower-than-expected oil demand growth
in Asia, helping to undercut the OPEC-led effort to
"We are indeed seeing lower demand from more than a few
clients - air, marine, road, industrial ... They are
actually consuming less fuel than anticipated," said
Michael Corley, managing director of Mercatus Energy
In China, vying with the United States as the world's
biggest oil importer, imports in May were still at a near
record of 9 million bpd, but a looming cut in refinery
operations is set to hit demand for crude oil in the third
In India, which overtook Japan as the world's third-
biggest oil importer last year, crude imports fell by more
than 4 percent between April and May to around 4.2 million
bpd <C-INIMP>, as after-effects of the country's recent
demonetisation programme hit consumption.
For the first five months of the year, India's imports are
about flat to the same period last year, following an
annual rise of 7.4 percent last year.
In Japan, Asia's most advanced economy, oil demand has
been in structural decline for years due to a declining,
ageing population, and the rise of cars with better
mileage or that use alternative fuels.
Japan in April imported around 3.5 million bpd <C-
JPIMPTOT>, down from a peak of 5.9 million bpd hit in
Coupled with plentiful supplies, the stuttering demand in
Asia has contributed to a 20 percent price fall for Brent
crude oil to around $45 per barrel, in what is the biggest
slump in a first half of a year since 1997.
In the latest indicator of a supply overhang, traders said
that five very large crude carriers (VLCCs) have been
chartered in recent days to store unsold oil.
Each VLCC can hold around 2 million barrels of oil, and
the five chartered for storage add to around 25
supertankers already sitting in southern Malaysian waters.
In a market condition known as contango, where spot crude
oil prices are cheaper than those for future delivery, it
is profitable to store oil for a later sales.
Currently, spot Brent is almost $1.50 a barrel cheaper
than that for delivery in early 2018.
"If oil prices head lower, floating storage will get more
traction," said Ashok Sharma, managing director of ship
broker BRS Baxi in Singapore.
The cheap spot price comes despite the effort led by the
Organization of the Petroleum Exporting Countries (OPEC)
to cut production by 1.8 bpd that has been in place since
Doubts over OPEC's compliance with its own targets and
soaring U.S. output have led to scepticism that markets
will re-balance soon.
"The slide in oil prices continues ... as markets remain
sceptical of OPEC's ability to balance supplies," ANZ bank
said on Friday.