ASIA'S OIL DEMAND WILL UP

PLATTS - 26 Jun 2023 - Asia's economic growth will drive the global oil demand in 2023 despite recessionary risks and economic headwinds, major OPEC+ players at the inaugural Energy Asia conference in Kuala Lumpur said June 26.

"Asia is a dominant economic force today on the global scene for oil demand and our forecast -- almost entirely -- is the demand growth this year 2023 will be coming from Asia, from China, from India, from Malaysia, Vietnam and many other Asian countries," OPEC Secretary General Haitham Al Ghais told S&P Global Commodity Insights on the sidelines of the conference.

"So we (OPEC) have a very important role to keep our communication channels open with our Asian partners," he added.

Asian demand has also led to Saudi Aramco's optimism about the global oil market's prospects for the rest of the year, its CEO Amin H. Nasser said at the conference, adding that oil market fundamentals remain "generally sound".

"Despite the recession risks in several OECD countries, the economies of developing countries, especially China and India, are driving healthy oil demand growth of more than 2 million barrels/day this year. This is high by historical standard," Nasser said.

He cited China as an example -- with its transport and petrochemical sectors showing signs of demand growth even amid economic headwinds.

China's oil demand was bolstered by road and air traffic overApril and May. During the May Day holiday, domestic tourism had increased significantly, though resumption of international flights will still take time, S&P Global Commodity Insights analysts said.

"Once the broader global economy starts to recover, supply-demand balances will likely tighten further," Nasser added.

Although the improvement seen in China's service sector paints a positive outlook for the domestic oil demand, manufacturing and construction sectors could struggle to contribute much to the overall fuel demand growth, market sources and analysts said.

China's official manufacturing PMI came in at 48.8 in May, down from 49.2 for April, according to the National Bureau of Statistics. This is also the second consecutive month where the PMI fell below the critical 50-mark, which separates expansion from contraction. China's real estate investment also declined 7.2% in the first five months, NBS data showed.

Still, the underperformance of China's economic rebound has made senior Chinese officials to urgently take advice from business leaders and economists on revitalizing the economy. Hence, more stimulus packages are anticipated to come out in the third quarter of 2023, with impacts to surge in substantially in Q4, S&P Global analysts said in a note.

Shift toward Russian oil

Saudi Arabia could be losing the market share in Asia, with Asian giants India and China opting for cheaper discounted Russian crude, S&P Global Commodity Insights reported previously.

According to S&P Global, initial data suggests Russian crude imports by Indian refiners in May reached an all-time high of nearly 2 million b/d, surpassing purchases by Iraq and Saudi Arabia combined and replacing Middle Eastern, African and some US supplies.

Looking ahead in 2023, the prospects for Russian crude oil flows into India look promising. It is projected that these imports may account for 40%-45%, or 2 million-2.5 million b/d, of India's crude oil import basket, assuming prices remain competitive compared with alternative sources, S&P Global had said.

Meanwhile, China's crude imports from Russia hit a fresh record-high of 2.30 million b/d (9.71 million mt) in May, with inflow volumes 32.6% higher than the 1.73 million b/d from second-largest supplier Saudi Arabia, S&P Global reported previously, citing the latest General Administration of Customs data.

China's crude imports from Russia are also likely to grow for the foreseeable future as Russia increased medium sweet ESPO Blend crude supplies to 39 Aframax-sized cargoes in May, with China taking 29 and India 10, according to Kpler shipping data and Platts cFlow ship and commodity tracking software from S&P Global.

When asked about such shifts in Asia's crude trade flows on the sidelines of the conference, OPEC Secretary General Haitham Al Ghais said the alliance have no concerns.

"The market is open for all players. Russia is a prominent player, a big player in the global oil markets. Malaysia and Asia are the major importers of oil and the market is open to all, there is demand growth that's going accommodate all of us," he added.

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