China changing world oil-demand map

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Last updated at: (Beijing Time) Friday, November 14, 2003

China changing world oil-demand map

China is driving faster-than-expected global oil-demand growth this year, helping underpin high world crude prices, the International Energy Agency said yesterday.

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China is driving faster-than-expected global oil-demand growth this year, helping underpin high world crude prices, the International Energy Agency said yesterday.

In a monthly Oil Market Report the IEA revised upwards its forecast for global demand growth in 2003 by 170,000 barrels a day to 1.28 million bpd, a rise of 1.7 per cent from 2002.

"The Japanese and European economies are expanding faster than originally expected and Chinese GDP growth keeps roaring along at a blistering pace," said the report.

The Paris-based agency, adviser on energy to 26 industrialized nations, also raised its projection for demand growth in 2004, by 20,000 bpd to 1.08 million bpd, forecasting total demand at 79.63 million.

China accounts for 90,000 bpd of the IEA's upward adjustment for 2003 with a projected increment of 440,000 bpd for total Chinese demand of 5.4 million bpd.

As a big net importer of crude and petroleum products, the China factor is an increasing influence on world oil prices, now bubbling at over US$31 for benchmark US light crude.

Led by China, Asian importers are mopping up increased volumes of crude from West Africa producers, leaving less available for European and US refiners.

"The breakneck pace of Chinese economic expansion is rapidly changing the oil demand map," said the agency, forecasting China would overtake Japan as Asia's biggest oil consumer in the second half of next year.

"At this juncture, China is the engine of global oil demand growth with significant room for further expansion in the industrial and transportation sectors."

The IEA said China's net imports hit a record 2.79 million barrels a day in September, up 680,000 bpd on the month. Net imports for the year to end-September averaged 1.99 million bpd, a rise of 23 per cent from the average for 2002.

It said it saw another 300,000 bpd of Chinese demand growth next year but that its projection had "considerable upside potential."

"Should economic growth trends continue, we would expect to see further upward revisions to Chinese oil demand in the future," the report said.

Post-war Iraq also is underpinning incremental oil consumption next year, the IEA said.

Domestic fuel demand is picking up, bolstered by sustained military consumption and a flood of consumer goods.

Persistent insecurity and repeated attacks on coalition troops have boosted military demand for longer, and at higher levels, than anticipated, the agency said.

The end of sanctions and the abolition of taxes have transformed Iraq into a vast duty-free zone, opening the floodgates to a stream of imports of energy-intensive consumer goods at prices well below inflated pre-war levels.

The report cited one estimate that 300,000 to 450,000 second-hand automobiles have been imported into Iraq since the war from across the Middle East.

Cheap consumer durable imports, including air conditioners, freezers, washing machines and televisions, have met robust pent-up demand, it added.

Problems with electricity supplies have boosted imports of power generators and increased diesel demand, it said.

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