As the global oil market frets about a stubborn supply glut, faltering demand growth among key Asian crude importers is further hampering efforts to restore market balance.
A fuel glut in China, a hangover from demonetization in India, and an ageing, declining population in Japan are holding back crude oil demand growth in three of the world’s top four oil buyers.
The three nations make up one-fifth of 97 million barrels per day in global oil consumption and any hiccups among them will mean lower-than-expected oil demand growth in Asia, helping to undercut the OPEC-led effort to support prices.
“We are indeed seeing lower demand from more than a few clients — air, marine, road, industrial... They are actually consuming less fuel than anticipated,” Mercatus Energy Advisors managing director Michael Corley said.
In China, vying with the US as the world’s biggest oil importer, imports last month were still at a near record of 9 million barrels per day, but a looming cut in refinery operations is set to hit demand for crude oil in the third quarter.
In India, which overtook Japan as the world’s third-biggest oil importer last year, crude imports fell by more than 4 percent between April and last month to about 4.2 million barrels per day as the after-effects of its recent demonetization program hit consumption.
For the first five months of the year, India’s imports were about flat from the same period last year, following an annual rise of 7.4 percent last year.
In Japan, Asia’s most advanced economy, oil demand has been in structural decline for years due to a declining, ageing population, and the rise of cars with better mileage or that use alternative fuels.
Japan in April imported about 3.5 million barrels per day, down from a peak of 5.9 million barrels per day in 2005.
Coupled with plentiful supplies, the stuttering demand in Asia has contributed to a 20 percent price fall for Brent crude oil to about US$45 per barrel, in what is the biggest slump in a first half of a year since 1997.
In the latest indicator of a supply overhang, traders said that five very large crude carriers have been chartered in recent days to store unsold oil.
Each carrier can hold about 2 million barrels of oil and the five chartered for storage add to about 25 supertankers already sitting in southern Malaysian waters.
In a market condition known as contango, where spot crude oil prices are cheaper than those for future delivery, it is profitable to store oil for a later sales.
Currently, spot Brent is almost US$1.5 per barrel cheaper than that for delivery in early next year.
“If oil prices head lower, floating storage will get more traction,” said Ashok Sharma, managing director of ship broker BRS Baxi in Singapore.
The cheap spot price comes despite the effort led by the OPEC to cut production by 1.8 barrels per day that has been in place since January.
Doubts over OPEC’s compliance with its own targets and soaring US output have led to skepticism that markets will rebalance soon.
“The slide in oil prices continues ... as markets remain skeptical of OPEC’s ability to balance supplies,” Australia & New Zealand Banking Group Ltd said yesterday.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
Qualcomm Inc, the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump. Revenue in the three months ended in June will be US$8.8 billion to US$9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be US$2.15 to US$2.35 a share. Analysts had projected sales of US$9.08 billion and earnings of US$2.16 a share. The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover this year. The San