APPEC representatives say Asia's oil demand center will shift from China to India.

At the 2023 Asia-Pacific Petroleum Conference (APPEC) organized by S&P Global Commodity Insights,What does a foreign exchange dealer do? delegates mentioned India's strong economic growth rate provides growth potential for long-term crude oil demand, positioning it to potentially replace China as Asia's new demand center.

FGE Chairman Fereidun Fesharaki indicated in a panel discussion on China, India, and Russia that China has been supporting global crude oil demand for the past 20 years. However, China's demand is expected to peak in the next three to five years, and the global market must focus on the demand elasticity of India or other countries.

S&P Global Commodity Insights also shares a similar viewpoint. Kang Wu, the Global Head of Demand Study at S&P Global, stated considering India's relatively low base, economic expansion, and young population, China's crude oil demand peak will occur earlier than India's, with Indian demand potentially growing for a longer duration.

Indian refiners attending the APPEC conference also mentioned that India is still seeking refinery expansion plans, indicating the country's crude oil demand has not yet peaked. Vivek Tongaonkar, CFO of Mangalore Refinery & Petrochemicals, pointed out that while China's crude oil demand might decrease slightly in the future, countries like India will see a significant increase. Despite a potential shift towards renewable energy, India's demand for crude oil and natural gas is expected to continue for decades.

Delegates stated that in terms of short-term prospects for crude oil demand, 2023 will be the final year of demand recovery post the global COVID-19 outbreak, with demand growth expected to slow from 2024. Fesharaki predicts a global demand increase of 2.4 million barrels/day this year, with next year's demand possibly dropping to 1.2 million barrels/day.

Looking into 2024, delegates anticipate global oil demand growth to slow to approximately 1.67 million barrels/day, with global aviation fuel demand expected to increase by about 440,000 barrels/day, driven by the aviation industry. Wu mentions that the aviation fuel demand is expected to rise by 1 million barrels/day in 2023, becoming the main driving force for global crude oil demand recovery from the COVID-19 pandemic.

S&P Global expects that in 2023, Asia's total crude oil demand will grow by 3.8% year-on-year, an increase of 1.39 million barrels/day, with China's demand approximately 42,000 barrels/day.

APPEC representatives mentioned that due to Russia's pricing advantages and the Indian refiners' increased capability to process Russian crude oil, Russia will become India's primary crude oil supplier in 2023. S&P Global's data shows that last year, India's crude oil imports from Russia were only 470,000 barrels/day, accounting for 10.2% of the total import volume. Since the beginning of this year, India's imports from Russia have risen to 1.82 million barrels/day, accounting for 37.2% of India's total crude oil imports from January to August.

According to S&P Global data, as long as Russian crude oil prices remain competitive with alternative sources from the Middle East and Africa, the volume of India's imports from Russia is expected to account for 35%-40% of its total imports in 2023, that is 1.9 million to 2.2 million barrels/day.

Wu noted that although the Russia-Ukraine conflict has led to an increase in Russian crude exports to China, the actual data shows that the growth rate is not only lower than pre-conflict levels but also lower than the pace of India's crude imports. More importantly, the majority of China's demand largely comes from independent refineries.

Oil tanker tracking data indicates that due to production cuts and tense situations in the Black Sea, Russia's total exports of crude oil and oil products in August averaged 5.27 million barrels/day, not only setting a low since September 2022 but also 650,000 barrels/day lower than pre-conflict levels.

The data also shows that Russia's average maritime crude oil transportation volume in August was 3 million barrels/day, not only approximately 800,000 barrels/day less than the April to May average but also well below the pre-conflict average of 3.1 million barrels/day.

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