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SINGAPORE, (Reuters): Lower oil prices could boost demand in Asia in 2015, with spot interest for diesel, Asia’s most widely used fuel, picking up in countries like Vietnam, Philippines and Indonesia, traders and analysts said.
Asia’s oil demand is expected to grow 660,000 barrels per day (bpd) to 31.11 million bpd in 2015, up from this year’s growth of 610,000 bpd, according to estimates by oil and gas consultancy KBC Advanced Technologies.
The region will add 310,000 bpd of refining capacity next year, which means demand growth will outpace supply in Asia.
“For next year, we expect demand to pick up strongly mainly because prices have been quite low,” said Jit Yang Lim, a senior staff consultant of KBC’s energy economics division.
“We expect prices to remain low next year with Brent to stay at about $ 70 a barrel, which means demand may pick up more strongly compared with last few years when Brent was hovering at about $ 110 per barrel on average.”
Brent crude oil futures have lost about half its value since June to below $ 60 a barrel, on worries about oversupply.
Already, diesel demand has picked up. Importers from Vietnam and the Philippines increased spot purchases of the oil product this month, said traders who supply fuel to these countries.
Indonesia’s diesel demand could pick up by 6% next year, with rising demand from the mining sector encouraged by higher coal prices, traders said.
“With lower fuel prices, they will make money. Oil prices at around $ 55 to $ 65 a barrel will mean good news for the industrial and mining sector,” said a Jakarta-based trader.
Demand for fuel oil, a shipping and blending fuel, could go up as lower prices encourage more shipowners to ramp up speed and as more refineries use the fuel as feedstock for secondary units being added, traders and analysts said.
“Although Asian regional fuel oil demand is in structural decline, we forecast demand to be higher in the next quarter reflecting the lower absolute prices supporting purchases,” said Jonathan Leitch, principal downstream analyst at Wood Mackenzie.
Demand growth for transport fuel gasoline will outpace supply growth in 2015, he said.
While the removal of subsidies in Asia could curb some demand, a drop in overall prices will mean that the impact will be muted, analysts said.
