December 11, 2023

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Saudi Aramco sees ‘sound’ oil outlook in second half of 2023 on China, India demand

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Kuala Lumpur: Saudi Aramco believes market fundamentals stay “sound” for the second half as demand from rising markets led by China and India will offset recession danger in developed markets, CEO Amin Nasser instructed an business gathering on Monday.

However different executives on the Power Asia convention in Kuala Lumpur have been divided, with Malaysia state oil agency Petronas reporting a slowdown in demand for petroleum and petrochemicals within the second quarter and rising refinery capability placing stress in the marketplace.

“General, we imagine that oil market fundamentals stay typically sound for the remainder of the yr,” mentioned Nasser, who heads the world’s largest oil firm.

“Regardless of the recession dangers in a number of OECD nations, the economies of creating nations, particularly China and India, are driving wholesome oil demand progress of greater than 2 million barrels per day this yr,” he instructed the convention.

Though China faces financial headwinds, the transport and petrochemical sectors are nonetheless displaying indicators of demand progress, he added.

Brent crude futures are down about 14 per cent for the reason that begin of the yr as rising rates of interest hit investor urge for food, whereas China’s promising financial restoration has faltered after a number of months of softer-than-expected consumption, manufacturing and property market information.

Crude oil provides from Russia and Iran have additionally held up regardless of Western sanctions, offsetting manufacturing cuts by Saudi Arabia and different members of the Organisation of the Petroleum Exporting International locations (OPEC).

“There’s not a lot geopolitical influence in the marketplace now. It’s dominated by economics, not geopolitics,” Daniel Yergin, vice chairman of S&P World, mentioned on the sidelines of the occasion.

Blended views

Russell Hardy, CEO of Vitol, the biggest unbiased oil dealer, mentioned the business in all probability faces a interval of moderately robust fundamentals within the subsequent three or 4 months, however uncertainty with Russian provide and Chinese language demand make it tougher to forecast market balances and the place costs are going.

“What has occurred thus far this yr is the provision aspect has barely overperformed, notably Russia, the place there have been expectations of manufacturing loss on account of the issue getting oil to market due to the sanctions,” he mentioned.

Sazali Hamzah, Petronas’ govt vp and CEO of downstream, was much less optimistic, saying that demand for petroleum and petrochemicals began slowing within the second quarter regardless of a restoration in jet gas consumption.

He expects new refining capability coming on-line this yr to place “loads of stress in the marketplace”.

“We imagine in second-half of this yr we’ll nonetheless see weak demand, and that will likely be prolonged to a part of subsequent yr,” he added.

Wanting forward, Vitol mentioned oil demand may peak round 2030.

“We acquired it peaking in about 2030 and a gradual decline out to 2040 After which (it’s a) speedy decline thereafter because the EV fleet and vitality transition takes over,” Hardy mentioned.

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