According to energy analysts at Bank of America, the return of Asian energy demand, spearheaded by the heavy consumption within the Chinese transportation sector, along with ongoing production cuts by OPEC and its allies, has the potential to propel crude futures above $100/bbl before 2024.
While other sectors such as industrial activity and real estate remain sluggish, the transportation trends in China have been remarkably positive. This has resulted in low petroleum fuel export quotas and relatively tight Asian product markets. It is worth noting that China stands as the largest global importer of crude.
Bank of America further highlights that China has been steadily accumulating oil inventories for several months to align with its increasing reliance on imported petroleum. This demonstrates a robust domestic demand in the country. Furthermore, China’s domestic refineries have been operating at full capacity, with crude imports reaching a near-record high of 12.4 million b/d in August.
Meanwhile, Indian refiners have also reaped benefits from their access to lower-cost crude supplies from Russia and Iran, facilitated by Western sanctions imposed on these countries. As a result, India can export more expensive products to Europe while enjoying the affordability of these alternative crude options.
However, the surge in electric vehicle sales across Asia, including India, has impacted gasoline and diesel prices downward due to declining domestic fuel demand. Bank of America predicts that this trend might push China and India into exporting any fuel surpluses they may accumulate.
The return of Asian energy demand, coupled with the unique dynamics of various countries within the region, presents both challenges and opportunities for global energy markets.
Asia’s Positive Demand Raises Predictions of Brent Prices Surging Past $100
Bank of America is expecting Brent prices to potentially soar beyond $100 per barrel by the end of 2024 if OPEC+ continues with its ongoing supply cuts. The current front-month November ICE Brent futures are trading at approximately $92 per barrel, reaching the highest level since November 2022. As reported by ICE data, Brent futures for deliveries between January 2024 and December 2024 are currently fluctuating between $83 and $92 per barrel.
Bank of America attributes the outperformance of distillate fuel against gasoline and crude futures over the past two months to their expectations of Asia leading global petroleum demand. Despite the fact that China’s international flights have yet to fully recover to 2019 levels, the domestic air travel sector has surpassed pre-pandemic levels. Jet fuel demand has also exceeded 2022 levels by an average of over 200,000 barrels per day (b/d) year-to-date.
Bank of America anticipates a continued recovery in jet/kerosene demand throughout 2024, projecting it to account for around one-fifth to one-third of Chinese oil demand growth in the coming months.
Reporting by Frank Tang; Editing by Michael Kelly