Asia’s oil markets are being upended as India’s and China’s refiners overtake once-dominant buyers like Japan and challenge the United States as the world’s biggest consumer.
The shifts are not only establishing new trade routes but are also challenging the way oil is priced in the region as the new players push for more cash cargoes and fewer long-term deals.
China and India’s combined share of world oil consumption has tripled since 1990 to over 16 percent, nearing the U.S. share of roughly 20 percent, cementing their status as the main center of global demand growth.
“Asian oil markets are in a tremendous period of flux,” said Owain Johnson, managing director of Dubai Mercantile Exchange (DME).
By 2040, China and India could double their share again to a third, analysts say.
One of Asia’s rising traders is Indian Oil Corp <IOC.NS>, which operates 11 refineries with a combined capacity of 80.7 million tonnes a year (1.9 million barrels per day), a third of India’s capacity and roughly the same size as Exxon’s <XOM> U.S. refining base.
“Spot crude (trading) gives more flexibility and more variety is available. Last year we raised spot purchases and for this year we are working out a strategy,” said its head of finance A. K. Sharma.
The changes come at the expense of western majors, with Shell <RDSa.L> complaining in December that aggressive trading, conducted by Chinese companies, meant Asian crude prices didn’t properly reflect the market.
“Chinese oil companies have become the new power houses in oil trading,” said Oystein Berentsen, managing director of crude at Strong Petroleum <0852.HK> in Singapore. Read more