OPEC+ Should Look to Asia’s Uneven, Uncertain Crude Oil Recovery- Russel

SEATTLE (Oil Monster): As members of the OPEC+ group struggle to come up with a united view on whether to boost crude oil output or extend production cuts, they should perhaps turn their eyes to Asia, the major consuming and fastest-growing region.

The leaders of OPEC+, a grouping comprising members of the of Organization of the Petroleum Exporting Countries (OPEC), plus Russia and others, are scheduled to meet on Monday and Tuesday to hammer out whether to roll over existing production cuts of 7.7 million barrels per day (bpd), or allow output to increase from January as previously agreed.

An initial meeting on Sunday ended without consensus, with members of the group split on how long to keep the existing cuts in place, or whether a gradual increase in output should be implemented.

The current oil demand situation in Asia, which accounts for about 36% of the global total and almost 80% of expected growth in coming years, shows the nature of the dilemma facing OPEC+.

Total crude imports for November for Asia are estimated at 25.04 million bpd, according to vessel-tracking and port data compiled by Refinitiv Oil Research.

This is 11% higher than the 22.6 million bpd for October, which was the lowest month so far in 2020.

The data does suggest that Asian crude demand is starting to recover from the economic hit caused by countries locking down in efforts to contain the spread of the novel coronavirus pandemic.

But it’s worth noting that November’s estimated crude imports are still well short of the 25.67 million bpd recorded in January, the last month before the pandemic starting curbing demand, first in China and then across the rest of the region.

What may be even more concerning for OPEC+ is the breakdown of Asia’s November imports, with much of the increase being down to a rebound in China’s buying.

China is on track to import about 11.56 million bpd, according to Refinitiv, up 15% from October’s 10.06 million bpd.

The question is why is China buying more crude, especially since it’s still busy digesting the record volumes purchased during April’s brief price war between OPEC+ heavyweights Saudi Arabia and Russia, which took until last month to be fully delivered.

The answer may lie in the fact that oil prices were low during the period when November-arriving cargoes were purchased, from late September through to October.

Courtesy: www.reuters.com