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India's petroleum consumption will grow at 6 per cent in 2017-18, double the rate at which fuel demand in China is projected to grow, Moody's Investors Service said today.
The US Energy Information Administration (EIA) projects total liquid fuels consumption in the Asia Pacific to rise by 0.9 million barrels per day (bpd) in 2017 to 33.3 million bpd.
China and India remain the fastest-growing product markets in Asia, collectively accounting for 80 per cent of total demand growth in the region.
"China's slowing economic growth will temper underlying product demand over the next 12-18 months. We estimate China's demand for refined-oil products will grow around 3 per cent annually in the next two years, compared with 4-5 per cent on average over the past five years.
"While petroleum consumption in India will likely grow 6 per cent annually in 2017-18, we believe this will not fully offset slowing growth in China," Moody's said in a report.
Moody's said Asian refiners have started to dial back their capacity additions and this trend is expected to continue in 2017-18, although the immediate impact on an oversupplied market will be somewhat limited.
Refiners have canceled, delayed or scaled back large- scale, greenfield refineries as well as capacity expansion projects that were originally planned to come on-stream over the next 18 months.
"We believe such project delays and cancellations are partly in response to the ongoing supply glut in Asia, following over 400,000 bpd of new capacity from India over the past few months," it said.
The economic slowdown in China, industry cyclicality and capacity overhang continue to pressure Asian refiners, despite stable outlook.
"We could change our outlook to negative if net refining capacity additions and increasing refinery output in Asia materially outpace growth in demand, such that our projected EBITDA for the industry declines by more than 10 per cent; or if demand from China and India contracts," it said.
Conversely, Moody's would consider a positive outlook if regional demand overwhelms capacity additions such that refining margins exceed USD 8 per barrel on a sustained basis, leading Moody's to raise its EBITDA growth forecast to above 10 per cent.
Moody's said slow but steady demand growth from China and India underpins its stable outlook for the Asian refining and marketing (R&M) industry, despite a likely modest earnings contraction through 2017.
"Increased refinery run rates in China, capacity additions and high stockpiles in the region continue to weigh on refiners' profitability, and we expect EBITDA for the industry will decline by 1-3 per cent through 2017," said Rachel Chua, a Moody's Analyst.
Despite growth in China and India, Moody's said it does not expect a material improvement in demand-supply dynamics over the next 12-18 month as demand growth will only match or marginally exceed total supply additions.
Against bloated supply and the lag effect of crude-price fluctuations on petroleum products, refining margins will be volatile through 2017.
Still, it expects a modest recovery in the Asian refining margin to USD 5.00-5.50 per barrel over the next 12-18 months, which is broadly in line with long-term average levels.
In Moody's view, low profitability levels will force small-scale, low-complexity refiners with a higher cost of production to cut back on output.
At the same time, it expects the healthy integrated downstream petrochemical operations of most Asian refiners -- accounting for 20-40 per cent of earnings -- will somewhat cushion the impact of lower refining profits through 2017.
For the aromatics players in particular, product spreads will likely be supported by strong demand. Lower naphtha feedstock prices will also maintain the improved profitability of naphtha-based petrochemical producers.
http://www.newindianexpress.com/bus...t-fiscal-Moodys/2016/09/26/article3630355.ece
The US Energy Information Administration (EIA) projects total liquid fuels consumption in the Asia Pacific to rise by 0.9 million barrels per day (bpd) in 2017 to 33.3 million bpd.
China and India remain the fastest-growing product markets in Asia, collectively accounting for 80 per cent of total demand growth in the region.
"China's slowing economic growth will temper underlying product demand over the next 12-18 months. We estimate China's demand for refined-oil products will grow around 3 per cent annually in the next two years, compared with 4-5 per cent on average over the past five years.
"While petroleum consumption in India will likely grow 6 per cent annually in 2017-18, we believe this will not fully offset slowing growth in China," Moody's said in a report.
Moody's said Asian refiners have started to dial back their capacity additions and this trend is expected to continue in 2017-18, although the immediate impact on an oversupplied market will be somewhat limited.
Refiners have canceled, delayed or scaled back large- scale, greenfield refineries as well as capacity expansion projects that were originally planned to come on-stream over the next 18 months.
"We believe such project delays and cancellations are partly in response to the ongoing supply glut in Asia, following over 400,000 bpd of new capacity from India over the past few months," it said.
The economic slowdown in China, industry cyclicality and capacity overhang continue to pressure Asian refiners, despite stable outlook.
"We could change our outlook to negative if net refining capacity additions and increasing refinery output in Asia materially outpace growth in demand, such that our projected EBITDA for the industry declines by more than 10 per cent; or if demand from China and India contracts," it said.
Conversely, Moody's would consider a positive outlook if regional demand overwhelms capacity additions such that refining margins exceed USD 8 per barrel on a sustained basis, leading Moody's to raise its EBITDA growth forecast to above 10 per cent.
Moody's said slow but steady demand growth from China and India underpins its stable outlook for the Asian refining and marketing (R&M) industry, despite a likely modest earnings contraction through 2017.
"Increased refinery run rates in China, capacity additions and high stockpiles in the region continue to weigh on refiners' profitability, and we expect EBITDA for the industry will decline by 1-3 per cent through 2017," said Rachel Chua, a Moody's Analyst.
Despite growth in China and India, Moody's said it does not expect a material improvement in demand-supply dynamics over the next 12-18 month as demand growth will only match or marginally exceed total supply additions.
Against bloated supply and the lag effect of crude-price fluctuations on petroleum products, refining margins will be volatile through 2017.
Still, it expects a modest recovery in the Asian refining margin to USD 5.00-5.50 per barrel over the next 12-18 months, which is broadly in line with long-term average levels.
In Moody's view, low profitability levels will force small-scale, low-complexity refiners with a higher cost of production to cut back on output.
At the same time, it expects the healthy integrated downstream petrochemical operations of most Asian refiners -- accounting for 20-40 per cent of earnings -- will somewhat cushion the impact of lower refining profits through 2017.
For the aromatics players in particular, product spreads will likely be supported by strong demand. Lower naphtha feedstock prices will also maintain the improved profitability of naphtha-based petrochemical producers.
http://www.newindianexpress.com/bus...t-fiscal-Moodys/2016/09/26/article3630355.ece
