Commodities 2022: the recovery in oil demand in Asia seems resilient, key response from OPEC+
Asian oil demand expected to increase by 1.7 mil b/d in 2022: Platts Analytics
China and India to drive sustained recovery in oil demand despite Omicron
Refiners expect 2022 to be strongest year for jet fuel since pandemic began
Oil demand in Asia could finally be on 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 plan their response supply will be crucial to sustain 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 witnessing a fragile economic recovery.
“As we leave behind the worst days of the pandemic, the oil and gas market is already in a stable recovery mode in volumes and prices from historic lows in mid-2020 and into 2022,” said Pankaj Kalra, CEO of Essar Exploration and Production Limited,” said S&P Global Platts.
According to Platts Analytics, Asian oil demand is expected to increase by 1.7 million b/d in 2022 and reach 103% of pre-pandemic levels, up from the 1.2 million b/d growth seen in 2022. 2021, although the full impact of the omicron variant of the coronavirus is still being evaluated. Growth will be driven by demand for middle distillates, which is expected to increase by 1.0 million bpd in 2022.
“Apart from China with a zero-COVID policy, most countries in the region are moving towards reopening economies despite an increase in omicron cases. Any lockdown is likely to be localized and more targeted, with less impact on oil demand than in the past,” said Lim Jit Yang, adviser for Asia-Pacific oil markets at Platts Analytics.
Stating a production increase of 400,000 bpd for February on January 4, the OPEC+ alliance signaled continued confidence that the omicron variant will have a smaller impact on global oil demand than previously believed. previously assumed. Crude prices have held up well so far, hovering above $80/bbl.
The 23-nation alliance, which controls about half of the world’s oil production capacity and instituted a record 9.7 million bpd cut during the spring 2020 stock market crash, has gradually restored production in increments of 400,000 b/d, with the aim of returning to pre-pandemic levels by the end of 2022.
“While there may be a short-term blow in the first quarter, with China entering difficult lockdown conditions and others like India, South Korea and ASEAN members implementing some level of restriction on their economy and travel, the overall outlook for crude oil is encouraging,” said Mumbai-based oil and gas consultant and adviser Rajat Kapoor.
Asian countries are increasingly showing signs of a strong recovery in demand.
India’s crude imports in November reversed a downward trend to a 10-month high as refiners built up inventories in anticipation of higher cycles. 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 Cell data. planning and analysis of the country’s petroleum.
“China and India will regain their frontline status as engines of growth in 2022, but Southeast Asia will also make a substantial contribution, especially in countries with high vaccination rates,” he said. said Platts Analytics.
Pick up speed
Refiners in South Korea and Japan were broadly cautiously optimistic that global oil demand recovery momentum will continue through 2022, with the revival of the regional aviation industry key to a full recovery in oil demand. transport fuel demand in Asia at pre-pandemic levels.
Seven middle distillate traders and distribution managers at five major South Korean and Japanese refiners – including Cosmo Oil, S-Oil Corp, ENOES – interviewed by Platts said jet fuel demand in Asia could return to at least 70% from pre-pandemic 2019 levels this year, which would ultimately lead to increased refining runs, crude imports and petroleum product production.
As gasoline and diesel consumption gradually catches up to pre-pandemic levels, South Korean refining sources and fuel distributors have said jet fuel is the latest missing headache.
South Korea, Asia’s fourth largest oil consumer, saw its combined demand for gasoline, diesel and jet fuel rise from around 740,000 bpd in 2021 to 729,000 bpd in 2020, according to the latest data from Korea National Oil Corp. The 2021 level remained below the 804,000 b/d observed in 2019.
“Ultimately, if the full recovery of the aviation industry and jet fuel demand materializes, it will likely put strong pressure on OPEC+ to accelerate the pace of the rise in crude oil production. group to meet higher throughput and operating rates across Asia,” a senior official said. trader in crude and distilled fuels at S-Oil.
Asian refiners believe that the global supply of crude remains very tight and that oil prices are downright overheated. End users continue to call on OPEC+ to increase supply by at least 800,000 bpd, doubling the producer group’s current position to increase production by a modest 400,000 bpd.