ME Oil Producers Raise Asian Investment Amid Stumbling US Oil Imports
Oil & Gas

ME Oil Producers Raise Asian Investment Amid Stumbling US Oil Imports 

Last updated on September 19th, 2020

Reports from the US Energy Information Administration reveal a significant drop in the US crude oil imports and exports, during the week ending Jan 17. As per the weekly petroleum status report, the crude oil imports of last week stood at 6.43 million barrels per day (b/d), which is 120,000 b/d less than the week earlier.

Crude oil exports hung at 3.41 million b/d, which is 67,000 b/d less than the week earlier. Over the past month, oil imports and exports averaged at about 6.52 million b/d and 3.61 million b/d respectively. Marking their highest since September 2017, the US Gulf Coast distillate inventories surged 71,000 barrels to 46.8 million barrels.

The ongoing tension in the Middle Eastern region is one of the primary reason for the drooping oil exports. Sources have reported that an increasing number of Middle Eastern oil producers are investing in energy projects of Southeast Asia. A joint venture between Saudi Aramco and Petronas in the Johar province adjacent to Singapore – PREfChem is a great exemplar of the increased investment agenda.

In 2019, the biggest oil producer of the UAE, Abu Dhabi National Oil Co. signed an agreement with Indonesia’s Pertamina for exploring opportunities. Future investments between the two countries are estimated to be worth $10 billion. The vast amount of crude resources has enabled the US to reach unusual places for supply.

As per government data, the US became Australia’s top crude supplier for the first time in November. Officials claim that after purchasing its first cargo of the US crude oil in 2019, Indonesia’s state-run Pertamina is now planning to increase purchases threefold. Currently, the Middle East accounts for almost half of South-east Asia oil imports.

As per 2018 statistics, the GDP of the 10-member Association of Southeast Asian Nations (ASEAN) rose 5.2 percent. Out of the total expenditure on oil imports, worth $74.4 billion, Saudi Arabia and UAE account for nearly half. Kuwait and Qatar stood at the fourth and fifth place respectively.

As per the estimates from Wood Mackenzie, oil product demand in Southeast Asia is expected to rise by more than 12 percent in the next five years, which is more than the ten percent growth expected in China. Speaking on the rising Asian investments in the Middle East, CEO of Gulf State Analytics Giorgio Cafiero said, “Within ASEAN, you have some of the most vibrant and fast growing economies in the world. Some of them are Muslim majority countries where countries like Saudi Arabia have maintained religious and cultural influence for many years.”

Based on analysts’ expectation of weakening oil demand in 2020, the OPEC and its Russia-led partners have decided to deepen cuts by 500,000 bpd in Q1. Consequently, a drop in the total production will follow. The Energy Minister of Saudi Arabia, Prince Abdulaziz bin Salman said yesterday that further cuts in oil production are quite possible in the summit of OPEC in March.

Considering the fact that the Middle Eastern countries are a major supplier of oil worldwide and the reduced dependency of the US on the Middle East for oil imports, the stumbling markets will surely levy long term impacts on the industry. One can only estimate the impact that the falling oil imports will levy on countries like Qatar and Kuwait. In such a scenario, increasing investment in the Asian region is a wise decision to make.

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