Gulf oil refineries, undergoing their biggest expansion in decades, are poised to ship the largest amount of gasoline and other fuels to Asia in eight months, tanker bookings compiled by Bloomberg show.
Traders hired ships in the spot market to load 3.91 million metric tons of refined petroleum in the four weeks to Aug. 10. The tally, the highest since December, doesn't capture shipments organized under long-term charters and shipbrokers don't report all transactions.
Middle East nations led by Saudi Arabia, the biggest crude exporter, are increasing their ability to refine the oil and profit from higher prices that processed fuels fetch. The region will add 815,000 barrels a day of capacity by the end of this year, according to estimates by Vienna-based analysts JBC Energy GmbH. That's about as much as the industry's largest product tankers normally transport.
"We see this increased flow of cargoes to Asia as a structural change that is likely to carry on for a few years," Michael Dei-Michei, energy-market analyst at JBC Energy, said by phone. "Refinery intake growth at countries such as Saudi Arabia, Kuwait and Oman has been pretty impressive so far this year."
Ship-charters can be canceled in private or vessels can sail to destinations other than those reported. The data excluded any ship that was booked twice within a 45-day period, about how long a ship sailing to Japan and back from Saudi Arabia would take.
Asia's importance as a source of demand is rising because Russia is increasing fuel shipments to Europe and surging oil production in the US has curbed the nation's dependence on foreign energy. China's gasoline demand rose 16 percent in June and consumption of middle distillates such as diesel advanced 6.9 percent, according to HSBC Holdings Plc.
"We do think Chinese demand is improving," said Abhishek Deshpande, a London-based oil markets analyst at Natixis SA, an investment bank. "Another factor for the increased flows from the Middle East could be that their refiners are undercutting Asian ones by selling at attractive prices."
Meanwhile, world oil prices diverged on Tuesday as traders balanced global demand fears against geopolitical concerns centered on Ukraine, analysts said.
Brent North Sea crude for delivery in September rose 17 cents to stand at $107.74 per barrel nearing midday in London.
US benchmark West Texas Intermediate for September fell 15 cents to $101.52 a barrel.
Singapore's United Overseas Bank said prices were hit by "concerns about global demand", but added that fears of tougher western sanctions against Russia over its support of separatist rebels in Ukraine were providing some support.
The European Union is expected to impose fresh measures against Russia on Tuesday, but there are concerns the move could hit the struggling eurozone economy as Russia is a key supplier of energy to the region.
Investors are also keeping an eye on the release of key US data, including on second quarter growth and job creation as well as consumer confidence in the world's biggest oil consumer.
Also, Wednesday will see the US Federal Reserve kick off its latest policy meeting. While bank policymakers are expected to keep interest rates at record lows and further cut their stimulus program investors are hoping for an indication that monetary policy could be tightened soon.
Singapore banking giant DBS said there should be "no surprises" as the Fed has already signaled that it will end its massive economic stimulus measures later this year.
The Saudi Gazette