Asia’s oil demand growth story loses the plot

Oil’s surge past $65 a barrel this year has often been pinned on the notion that soaring Asian fuel demand is straining global supply. Asia’s physical markets, more in touch with fundamental oil flows than speculatively driven futures markets in London or New York, beg to differ. Demand across the barrel has deflated this summer, sending key Asian market gauges to record-lows as high global prices curb consumption — for two very different but related reasons. In countries such as Thailand and Vietnam, governments are finally passing on higher costs after months of subsidies, cutting into demand; in China and Indonesia, a reluctance to raise prices too much has placed a huge financial burden on state oil firms, forcing them to reduce supply. Asian demand was part of the justification (for higher prices) last year but now the focus has turned to Europe and the United States,” said Colin Tang, senior oil trader at French investment bank Calyon in Singapore.
Reuters