Oil traders eye the West, India as China imports slip
Friday, February 03, 2006
Forget China in 2006. Sell crude to India, diesel to the United States and watch the growth of global shipping trade if you want to capitalize on the trends that will shape the Asian spot oil market this year.
China, whose oil demand surge helped drive crude's two-year rally, was the watchword for almost all Asian traders in 2005, but a halt in diesel imports, weaker fuel oil demand and a lack of naphtha buying dashed many bullish expectations.
Crude imports by the world's No2 consumer are expected to rise by 6 or 8percent this year - modest compared with the shocking 35 percent surge of 2004 - but an increase in domestic refining should sate the expected growth in consumer fuel demand, muting China's impact on regional flows.
While China's overall demand growth is still likely to add strain to world oil markets already unnerved by geopolitical developments, physical oil traders are more concerned with seeking new niches for product sales and profitable trades.
Arbitrage deals, exploiting the price differences between regions or markets, are likely to increasingly feature as Asian traders view growing United States and European demand for transport fuels and constrained refinery expansion outside Asia.
"Arbitrage imports to the West will play an important role, as they enable excess supplies to move out of the region so as to balance up supply and demand," said veteran trader Loh Fan Yip from Koch Refining International.
Asia's third-largest consumer India will also come into sharp focus as it embarks on an ambitious plan to turn itself into a refining export hub, with much of its added 400,000 barrels per day of capacity aimed at international markets.
posted by Oil Shock at 2:35 PM
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