Raw materials 2022: recovery in oil demand in Asia is resilient, key to OPEC + response
Asian Oil Demand Expected To Increase 1.7 Million Barrels Per Day In 2022: Platts Analytics
China, India to drive sustained recovery in oil demand despite Omicron
Refiners expect 2022 to be the strongest year for jet fuel since the start of the pandemic
Oil demand in Asia may finally follow a sustained upward trend after a long period of uneven growth, with consumption in China and India looking increasingly resilient, but the way OPEC + members are planning their response supply will be crucial to support this recovery.
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The first decision taken in 2022 by OPEC and its Russian-led partners to approve a further increase in production quotas – betting that the market can absorb more oil in the coming months despite the surge in COVID infections – 19 – will be music to the ears of Asian oil importers who are witnessing a fragile economic recovery.
“As we leave the worst days of the pandemic behind us, the oil and gas market is already on a steady recovery path in volumes and prices from historic lows in mid-2020 and 2022,” Pankaj Kalra , CEO of Essar Exploration and Production Limited, “said S&P Global Platts.
According to Platts Analytics, demand for Asian oil is expected to increase by 1.7 million barrels per day in 2022 and reach 103% of pre-pandemic levels, compared to the 1.2 million barrels per day of growth seen in 2021, although that the full impact of the omicron variant of the coronavirus is still being assessed. Growth will be driven by demand for middle distillates, which is expected to increase by 1.0 million bpd in 2022.
“With the exception of China with a zero COVID policy, most countries in the region are moving towards reopening economies despite an increase in omicron cases. Any blockage is likely to be localized and more targeted, with less impact on oil demand than in the past, ”said Lim Jit Yang, Asia-Pacific Oil Markets Advisor at Platts Analytics.
Claiming a production increase of 400,000 bpd for February on January 4, the OPEC + alliance has indicated that it remains confident that the omicron variant will have a smaller impact on global oil demand than it does. never assumed it before. Crude prices have so far shown resilience, hitting above $ 80 / bbl.
The 23-country alliance, which controls about half of the world’s oil production capacity and instituted a record 9.7 million bpd cut in the spring 2020 stock market crash, has gradually restored production in increments monthly payments of 400,000 bpd, with the aim of regaining pre-pandemic levels by the end of 2022.
“While there may be a short-term incident in the first quarter, with China set to undergo tough lockdown conditions and others like India, South Korea and ASEAN members putting implementing some level of restriction on their economy and travel, the overall outlook for crude oil is encouraging. “said Rajat Kapoor, Mumbai-based oil and gas consultant and advisor.
Asian countries are increasingly showing signs of a robust recovery in demand.
India’s crude imports in November reversed a downtrend to reach their highest level in 10 months as refiners built up inventories in anticipation of higher series. The country imported 18.37 million tonnes, or 4.5 million b / d, of crude in November, up 7.5% month-on-month, according to the latest provisional data from the Petroleum Planning and Analysis Cell.
“China and India will resume their frontline status as growth engines in 2022, but Southeast Asia will also contribute substantially, especially in countries with high vaccination rates,” said Platts Analytics.
Pick up speed
Refiners in South Korea and Japan were generally cautiously optimistic that the recovery momentum in global oil demand would continue through 2022, with the recovery of the regional aviation industry holding the key to the recovery. transportation fuel demand in Asia to pre-pandemic levels.
Seven middle distillate traders and distribution directors of five major South Korean and Japanese refiners – including Cosmo Oil, S-Oil Corp, ENOES – surveyed by Platts said demand for jet fuel in Asia could fall to at least 70% of what it was before the pandemic. 2019 levels this year, which would ultimately lead to increased refining cycles, crude imports and petroleum product production.
With gasoline and diesel consumption gradually catching up to pre-pandemic levels, South Korean refinery sources and fuel distributors said jet fuel was the last missing puzzle.
South Korea, Asia’s fourth-largest oil consumer, saw its combined demand for gasoline, diesel and jet fuel jump to 740,000 bpd in 2021, from 729,000 bpd in 2020, according to the reports. latest data from Korea National Oil Corp. The 2021 level remained below the 804,000 bpd seen in 2019.
“Ultimately, if the full recovery in the aviation industry and in jet fuel demand takes place, it will likely put a lot of pressure on OPEC + to accelerate the pace of the group’s crude production spike in order to meet higher throughput and throughput rates across Asia, ”said a senior crude and distillate fuels trader at S-Oil.
Asian refiners believe that the global supply of crude remains very limited and that oil prices have outright overheated. End users continue to ask OPEC + to increase supply by at least 800,000 b / d, doubling the grower group’s current position to increase production by a modest 400,000 b / d.