Sector to see better demand for O&G commodities

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KUCHING: Demand for oil is expected to normalise this year, with higher demand likely to come from emerging economies.

ANTICIPATED DEMAND: Industry experts still believe that oil demand will emanate from China, which is trying to cool its economy while still growing at a strong six to eight per cent per annum.

This was one of the sentiments shared by leading experts during the 16th Asia Oil & Gas (O&G) Conference held earlier this week, observed senior analyst Jason Yap from OSK Research Sdn Bhd (OSK Research).

He said emerging economies were expected to record six per cent in oil demand growth this year compared with the advanced economies’ estimate of two per cent.

“This is because advanced economies such as the US, Europe and Japan are still mired in their own economic woes but the problem in the emerging economies is one of controlling inflation,” he summarised in an online report.

“Nevertheless, the combined oil demand from both the emerging and advanced economies is expected to increase by 40 per cent by 2030. This is achievable since about 60 per cent of the world population would be working and living in cities by 2030, which would result in higher energy usage.”

This expectation was made on the back of 2011 being a better year after the quantitative easing in the US, which helped the country’s economy weather the worst of the financial crisis and lent some support to the recovery of global economies in general.

Also, Yap said worries of a double dip recession in 2010 have receded, leading to oil demand surging by 2.7 million barrels per day (bpd).

“Having said that, we believe that new capex (capital expenditure) spending will make a come-back, which should be good for all O&G service providers,” he noted.

“Since Malaysia lies along the trade route between the East and the West, we believe there will be good future demand for its services in Pengerang, Johor, which would soon be developed as the region’s O&G trading hub.”

Nevertheless, the OSK Research analyst highlighted that although most industry experts believe that oil demand has recovered, there were still uncertainties over its strength.

“For example, Japan has yet to show how fast it can recover from the after-effects of the tsunami since its previous rapid recovery from the Kobe earthquake earlier is not a good gauge as its government had lower debts back then,” Yap explained. “This raises a question over whether there would be massive spending by the Japanese government this time around.

“On the other side of the world, the European region is still facing a debt crisis and may take time to recover while the US is still making small recovery steps.

Industry experts still believed that oil demand would emanate from China, which was trying to cool its economy while still growing at a strong six to eight per cent per annum.

Moreover, it was understood from data that China’s demand for oil was expected to grow by four to five per cent a year to reach about 10.6 to 11.3 million bpd by 2015.

In a separate report, an analyst from RHB Research Capital Sdn Bhd (RHB Research) picked up on the fact that a considerable portion of the conference was centred on another hot commodity – natural gas.

“We think this was mainly due to the comparative benefits of natural gas, apart from the increasing difficulty in finding ‘easy oil’ nowadays. The proof of natural gas gaining popularity can be measured from the growing demand for liquefied natural gas (LNG),” he believed.

RHB Research underscored three distinctive demand groups for Asia which were the established LNG markets in Japan, South Korea and Taiwan; growing mega-markets in China and India; and emerging markets in Southeast Asia which includes Malaysia, Singapore and Thailand.

Overall, both research houses affirmed that almost all the speakers at the event were positive on the industry’s outlook going forward and maintained an overweight stance on the O&G sector.

KUCHING: Demand for oil is expected to normalise this year, with higher demand likely to come from emerging economies.
This was one of the sentiments shared by leading experts during the 16th Asia Oil & Gas (O&G) Conference held earlier this week, observed senior analyst Jason Yap from OSK Research Sdn Bhd (OSK Research).
He said emerging economies were expected to record six per cent in oil demand growth this year compared with the advanced economies’ estimate of two per cent.
“This is because advanced economies such as the US, Europe and Japan are still mired in their own economic woes but the problem in the emerging economies is one of controlling inflation,” he summarised in an online report.
“Nevertheless, the combined oil demand from both the emerging and advanced economies is expected to increase by 40 per cent by 2030. This is achievable since about 60 per cent of the world population would be working and living in cities by 2030, which would result in higher energy usage.”
This expectation was made on the back of 2011 being a better year after the quantitative easing in the US, which helped the country’s economy weather the worst of the financial crisis and lent some support to the recovery of global economies in general.
Also, Yap said worries of a double dip recession in 2010 have receded, leading to oil demand surging by 2.7 million barrels per day (bpd).
“Having said that, we believe that new capex (capital expenditure) spending will make a come-back, which should be good for all O&G service providers,” he noted.
“Since Malaysia lies along the trade route between the East and the West, we believe there will be good future demand for its services in Pengerang, Johor, which would soon be developed as the region’s O&G trading hub.”
Nevertheless, the OSK Research analyst highlighted that although most industry experts believe that oil demand has recovered, there were still uncertainties over its strength.
“For example, Japan has yet to show how fast it can recover from the after-effects of the tsunami since its previous rapid recovery from the Kobe earthquake earlier is not a good gauge as its government had lower debts back then,” Yap explained. “This raises a question over whether there would be massive spending by the Japanese government this time around.
“On the other side of the world, the European region is still facing a debt crisis and may take time to recover while the US is still making small recovery steps.
Industry experts still believed that oil demand would emanate from China, which was trying to cool its economy while still growing at a strong six to eight per cent per annum.
Moreover, it was understood from data that China’s demand for oil was expected to grow by four to five per cent a year to reach about 10.6 to 11.3 million bpd by 2015.
In a separate report, an analyst from RHB Research Capital Sdn Bhd (RHB Research) picked up on the fact that a considerable portion of the conference was centred on another hot commodity – natural gas.
“We think this was mainly due to the comparative benefits of natural gas, apart from the increasing difficulty in finding ‘easy oil’ nowadays. The proof of natural gas gaining popularity can be measured from the growing demand for liquefied natural gas (LNG),” he believed.
RHB Research underscored three distinctive demand groups for Asia which were the established LNG markets in Japan, South Korea and Taiwan; growing mega-markets in China and India; and emerging markets in Southeast Asia which includes Malaysia, Singapore and Thailand.
Overall, both research houses affirmed that almost all the speakers at the event were positive on the industry’s outlook going forward and maintained an overweight stance on the O&G sector.