InterviewChina oil demand to gallop on strong econ growth - IEA

02 November 2010 10:09  [Source: ICIS news]

By Pearl Bantillo

IEASINGAPORE (ICIS)--Oil consumption in China is expected to continue growing at a strong pace, backed by a superior economic growth, firming up the country’s ranking as the world’s top energy consumer, as defined by the International Energy Agency (IEA).

China’s economic growth level is continuing at this very high growth. It means much more rapid growth in energy consumption compared to OECD countries in general,” said IEA's executive director Nobuo Tanaka in an interview on Tuesday.

Tanaka is in Singapore for the Clean Energy Expo Asia 2010, which is part of the Singapore International Energy Week (SIEW) that runs from 27 October to 4 November.

“In our definition of energy consumption, China overtook the United States in 2009 as the largest energy consumer,” he said, while adding that China continued to refute the findings.

“Statistical models differ by country. China thinks they are not, yet they are the largest consumer of energy,” Tanaka said.

The country’s carbon emissions had surpassed those of the US in 2007 given heavy reliance on fossil fuel, primarily coal, the IEA executive said.

The gap in China and US consumption would only get “bigger and bigger in the future”, he said, taking into account the declining trend in energy usage from industrialised countries or OECD (Organisation for Economic Cooperation and Development) countries.

The IEA expects oil demand of OECD countries to start falling again in 2011 after a slight increase this year, following a sharp slowdown when the global economy plunged into recession in 2009, Tanaka said.

“Has oil demand been depressed cyclically or structurally destroyed? We think both are happening,” said the IEA executive.

Tanaka said that OECD countries currently have “historic high levels of inventory”.

“If [oil] producer countries continue to produce at current levels, probably the market will be very well supplied well into the second half of next year,” he said.

Lingering uncertainty on the recovery of the global economy had kept oil prices relatively stable this year - locked at a $70-80/bbl (€50-58/bbl) range, said Tanaka.

But developments in the financial markets could amplify oil price movements, he said.

“There are plenty of reasons behind [oil price movements], not necessarily fundamentals,” Tanaka said.

The weakness of the US dollar due to the sagging US economy was encouraging more investors to park their funds in commodities market like crude futures, thereby driving up oil prices.

At 17:50 hours Singapore time (09:50 hours GMT), NYMEX light sweet crude for December delivery was up 38 cents to $83.33/bbl.

($1 = €0.72)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Pearl Bantillo
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