Oil executives face grim reality at APPEC 2023 amid China’s economic slowdown

The oil party is not over yet, but for top traders and executives who gather for conversation and cocktails on rooftops in Singapore This week, the exuberance that came with the huge gains of the past few years is quickly fading.

China The economic slowdown, structural changes in the global energy mix and the prospect of increased crude supply are weighing on refiners and producers. Processing margins have plummeted. Traders will be no less disheartened as the turbulence of the pandemic and the months following Russia’s invasion of Ukraine – once-in-a-generation events – has been replaced by low volatility.

The thousands of oil executives, hedge funds and investors gathered at the Asia-Pacific Petroleum Conference (APPEC) will be faced with the stark reality that is already forcing financial world Analysts have revised their price and demand forecasts downwards. In recent weeks, global oil prices have erased all of this year’s gains. OPEC and its allied countries have been forced to postpone a supply increase that could have brought the market into surplus.

Sentiment is undoubtedly bearish, said Warren Patterson, head of commodity strategy at ING Groep NV in Singapore, unless we return to the geopolitical uncertainty and trading frenzy of the 1990s. Donald Trump He was in the White House. “It would take someone like Trump to come back to the White House to shake things up again and add that kind of excitement and turbulence to the market.”

Of all the grim topics to be discussed at Asia’s biggest oil meeting of the year, the hardest to avoid will be China and the question of whether cooling consumption is masking a more permanent decline in fossil fuel use as clean energy takes hold.

from Beijing economic The problems run deep and indicators have repeatedly raised warning signs about demand in the world’s largest crude importer, until recently a key source of growth for global crude. In August, factory activity contracted for a fourth straight month, while credit data has been dismal and the labor market is gloomy. Economists now forecast that China will miss its growth target of around 5% this year.

Traders anticipating a stimulus-fueled recovery have been repeatedly forced to revise their forecasts, initially pushing the revival back to early this year and now to 2025.

Even then, China will likely face a new normal when it comes to energy. Commodity trader Trafigura is among those who have suggested that the country’s gasoline demand may have already peaked due to rapidly growing demand for natural gas. electric vehicleswhile high-speed rail travel and liquefied natural gas-powered trucks are dampening appetite for jet fuel and diesel. These factors, combined with a drop in consumer confidence, have already contributed to a year-on-year drop in crude oil imports between January and July, a phenomenon previously seen only during the worst conditions of the crisis. COVID-19.

The other cloud hanging over the Singapore meeting is the Organization of the Petroleum Exporting Countries and its allies and what comes next, even after the cartel ignored the Libyan cuts and delayed additional supply for two months, a move that still wasn’t enough to reverse steep price losses.

From OPEC Since it began cutting output in 2020, some of the group’s traditional suppliers have been losing ground in China, where refiners have increased imports of restricted crude, using networks the U.S. cannot access. India has turned to lesser-known entities to broker deals.

While Saudi Arabia has invested more in Chinese refineries, securing some demand in the refining market, it is unclear whether that is enough to stem a slide. A drop in margins is limiting processors’ ability to pay for imports, leading to operating rates in China’s private refining sector hovering around 50% or less in recent weeks. Meanwhile, state-owned processors are considering cutting volumes in a counter-seasonal move.

The only undisputed winner next week will be the city-state of Singapore. From its skyscrapers, oil Executives will be able to see the line of hundreds of ships waiting off the coast for a chance to refuel, a reminder that this is one of the world’s busiest bunkering hubs as well as a key financial center.

Since the attacks of Houthis Since the Red Sea unrest began last year, Singapore’s port has seen a surge in bunker fuel sales and transshipment activity as vessels ranging from container ships to supertankers make the detour around the African continent, skipping places like Fujairah in favor of Southeast Asia.

The trading community that has prospered alongside the port continues to expand. From Dubai Its emergence as an attractive alternative for many businesses — a financial center where companies handling transactions with Iran and Russia can easily set up and dissolve — has yet to dampen the island nation’s appeal.

What could be the subject of an uncomfortable debate, over cocktails and presentations, is whether China’s slowdown could…

Disclaimer: This story has been published from a news agency source without any modifications to the text. Only the headline has been changed.