S&P Global — 16 September 2024
Daily Update: September 16, 2024
Oil Insights Coming Out of APPEC
By Nathan Hunt
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On Sept. 12, the annual Asia Pacific Petroleum Conference wrapped up in Singapore. The Asia Pacific Petroleum Conference (APPEC) is organized by S&P Global Commodity Insights and is one of the leading energy conferences for global and regional markets. With oil markets in a state of flux due to unexpectedly low global demand, the insights emerging from the conference provide context for understanding the trend of oil.
Overall, the demand picture for oil looks more bearish than anticipated. China’s appetite for oil appears to be slowing, and the US may be seeing a dip in demand growth. Still, APPEC attendees did not believe that a slowing market for oil presents serious headwinds. Other demand centers such as India will support oil prices due to increasing consumption patterns.
"For oil markets, I don't expect a boom. Certainly, things are slowing down. But does that mean a bust? I don't think so. Markets will be stagnant perhaps and that's bad enough for oil, " Gunvor Chairman Torbjörn Törnqvist said on an APPEC panel.
Last week, OPEC and the International Energy Agency cut their oil demand forecasts for 2024. The two organizations have recently been at loggerheads over differing estimates for long-term oil demand, but they share a view that weak demand from members of the Organisation for Economic Co-operation and Development has been an issue.
The role of geopolitical turbulence in oil markets was also a focus for this year’s APPEC. The war in Ukraine, conflicts in the Middle East, and tensions between Venezuela and Guyana over offshore oil reserves have already created upheaval in oil markets.
Despite reduced demand growth, many Asian economies are continuing to expand refinery capacity. However, the expectation that electric vehicles could further reduce demand has pushed some refiners to focus capacity on petrochemicals rather than transport fuels.
"Asia will continue to focus on expansion of transport fuel capacity in the near term as there is a genuine need to meet the growing product requirements in the near term. But they will start to increasingly tilt toward petrochemicals in the next decade," said Sri Paravaikkarasu, director of market analysis at Phillips 66 International Trading.
Asian upstream companies have been aggressively pursuing stakes in oil and gas producing assets, particularly in Southeast Asia. While some Western oil companies have been looking to divest less productive assets in Indonesia and elsewhere, Asian players have been buyers looking to realize short-term gains. The pattern of consumption appears to be heading for a plateau and eventual decline in Asia, but there is still money to be made in crude oil.
Today is Monday, September 16, 2024, and here is today’s essential intelligence.
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