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Poten & Partners: Asian shift for petroleum industry

Poten & Partners: Asian shift for petroleum industry

New York: When oil demand eventually recovers, changing trade flows as well as new energy suppliers and pricing relationships will reflect the growing importance of Asian markets. New York broker Poten & Partners, commenting in a recent report, notes that the petroleum industry's centre of activity has shifted eastwards to nations in Asia, notably China and India, where new refining capacity against a backdrop of stagnant world demand has chipped away at the "Asian premium" that previously added cost to barrels headed eastward.

In the US, the economy, concern over national security and the environment have been catalysts in a strategy that will see less dependence on foreign oil. In Europe, meanwhile, a preference for diesel over gasoline and environmental issues are changing trade flows in the region. And the Middle East and Africa are striving to supply more whilst fostering rising demand at home. Brazil provides an example of how to harness biofuels on a scale that impacts petroleum demand whilst countries in the Former Soviet Union "are attempting to navigate a complicated position between their former benefactors in Moscow and customers in Europe," Poten says.

According to figures from the broker, biofuels accounted for just one per cent of total road transportation fuel supply in 2008 but a host of economic, infrastructural and political constraints suggest that their role is not likely to be fully defined for years to come. "Focus has sharpened on the development of "second-generation" non-grain feedstocks that should assuage food security concerns," Poten notes, "but experts say this new generation is 10 to 15 years from wide-scale adoption with many hurdles yet to overcome."

However, it is Asian demand that is likely to provide the catalyst for a recovery in the demand for transportation fuels, a topic that the broker has investigated in detail in a soon-to-be-published research study. "As the automobile continues to expand its place within the cultures of the rapidly-developing demand centres of the East, supply of transportation fuels should provide opportunities for refiners and ship owners for decades to come," Poten concludes.  [18/05/09]