Saudi Aramco sees increased oil demand from emerging economies, especially China
Crude oil prices have rebounded around 1% to US$78/barrel this morning following yesterday’s sharp decline after worse than expected supply report from the US Department of Energy (‘DoE’). The oil market has been buoyed by further dollar weakness and press reports about Saudi Aramco’s perception of Chinese demand growth in 2010.
Yesterday, Crude prices fell more than 3% as investors reacted to the weekly supply report from the DoE. The data showed that crude inventories were considerably worse than expected - crude supplies increased by 1.7 million barrels versus analyst expectations of a 1 million. Gasoline inventories were also worse than expected rising over 2.5 million barrels, the market had anticipated a decrease of 300,000 barrels.
The oil market has been in limbo over recent weeks, on the one hand the US outlook appears conflicted at best with week-to-week swings in supply centred sentiment and recovery hopes. The most recent data seems to be drawn towards the negative, with both employment and inventory data disappointing. On the other hand however reports are increasingly pointing to an improved demand outlook going forward among the world’s other leading economies, particularly in developing regions, namely China.
In the news today it was reported that Saudi Aramco's Chief Executive Khalid Al-Falih sees signs of recovery in oil demand in developing and emerging economies, led by China. As a result of the improving Chinese demand, speculation is increasing that Saudi Arabia may increase production in 2010.
Earlier this week a report by Chinese customs authorities indentified increasing import demand in October. According to data released by Chinese customs authorities, China’s net oil imports were increasing and almost reached 4.5 million barrels per day (bpd) last month. The data reflects a 13% increase over September and it is the second-highest month on record.
Saudi Aramco is the state-owned national oil company is the largest oil corporation in the world with both the largest proven crude oil reserves and largest production capacity. Aramco also operates the world's largest single hydrocarbon network, the Master Gas System.
Additionally the US Energy Information Administration (EIA) also raised eyebrows this week as it commented on its projections for 2010. According to the EIA’s projections the gap between supply and demand is due to narrow compared with its previous guidance. The EIA is forecasting global production to rise to 85.49 million bpd while demand is also expected to be higher at 85.40 million bpd. Previous EIA guidance projected a surplus of 290,000 bpd.
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