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THE three biggest economic powers and the three largest oil consumers – the USA, China, and India – are set for stable economic growth, thereby pushing for increased demand for oil. This has helped in stabilizing oil prices after two weeks of losses and concerns about further decline in the oil prices. Currently, the prices seem to be back on track, hovering around $90 per barrel. This is the level that is acceptable to all oil producers. It could potentially offer a buffer and reassurance if OPEC+ finds it necessary to adjust its production quota due to any tightening in the oil market.
The decrease in inventories in the USA, coupled with escalating tensions in the Middle East, has propelled the rise in barrel prices. Additionally, optimism surrounding economic growth and expected inflation last month has fueled increased investment in oil exploration. This effort aims to maintain their status as the leading oil producers, further widening the gap between the top OPEC+ members. On the other hand, China’s growth exceeded expectations last month, reaching 5.3%, signaling a steady rate of 5% for the current year. Its oil demand is projected to exceed 500,000 barrels per day, accounting for nearly 50% of global growth projections. With a daily oil consumption reaching around 14.5 million barrels, China is poised to become a key customer for Arabian Gulf producers. Saudi Aramco has taken the lead in directly selling crude oil and petroleum products, as well as building and investing in grassroots refineries, recognizing China’s energy significance.
The rest of the producers have to play “Catch me if you can”. The third country to watch and invest in is India, with its oil consumption hovering around 5 million barrels. It is projected to surpass China by 2027 and become the fastestgrowing major economy. India is poised to be a focal point for Gulf producers, needing further upstream investments. It’s imperative for us to focus on investing in India, particularly in its oil sectors, especially in refining. The two crucial oil-importing nations that we need to observe and follow are India and China. Kuwait has been exporting petroleum products to India since 1971 and to China in more recent years, primarily with Kuwaiti crude oils. It is essential to maintain strong ties with these countries and secure long-term partnerships for Kuwaiti hydrocarbons, considering it is our core business focus.
Meanwhile, the USA markets should be viewed as occasional spot buyers and a last resort, with the intention to keep it that way. Today the oil market is stable with balance in both supply and demand. It appears that there is currently more oil available in the markets compared to the past, despite the adherence to OPEC+ quotas. As a result, oil prices are expected to remain firm and may even rise further in the upcoming months, particularly during the winter season. This could prompt OPEC+ to increase oil production, especially if prices exceed $90 per barrel.
By Kamel Al-Harami
Independent Oil Analyst
e-mail: [email protected]
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