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Brent oil price surges ahead looks to Asian oil demand
Published on August 4, 2010 by oilprices · 1 CommentBrent oil prices open today’s trading session ahead of WTI oil and over $82 a barrel, posting four straight daily gains as investors look to Asian oil demand to gauge the future price of oil.
In London, Brent crude oil futures for September 2010 delivery were trading at $82.43, 08.45 GMT on the ICE Futures Exchange, slightly lower than on open.
Surging Oil Demand in Asia Boosts Brent Oil Futures
Analysts point to surging oil demand in developing economies including China to point the way forward for crude oil prices. Chinese energy consumption per unit of GDP rose 0.09 percent year on year in the first half of 2010, the National Bureau of Statistics (NBS) had reported on Tuesday.
“The underlying fact is that Asian emerging markets are still growing and so is their consumption of energy.” Sander Capital said in a report.
Surprisingly, oil prices were not depressed by a series of weak economic data released in the US Tuesday, which had stock markets on a retreat.
Tags: Asian, brent, brent oil price, future, oil, oil demand, oil price, price, prices, trading
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Oil demand/prices over the next decade will to a large degree be driven by emerging economy demand at the margin. Here is a simple thought experiment using Chinese demand to generate some rough “back of the envelope” forecasts:
- China moves from 3 bbls/person/year to the South Korean per capita consumption level of 17 bbls/person/year over the next 30 years
- No peak in global production
Result: In next 10 years we must find 44 million BOPD – 26 million BOPD to maintain supply and 18 million BOPD to keep up with demand increases.
If you superimpose peak production on top of this demand profile using the following parameters oil prices would increase approximately 250% in real terms over next 10 years – most likely something would give far before that price level:
- Oil demand elasticity of -0.3
- Current production 84 million BOPD, current price US$ 80
- Peak production 100 million BOPD
- Post peak decline rate of 3-4%
If you want to try the china oil demand or the peak oil models for yourself using your own assumptions they can be found at Enquirica in the “Research” section: http://www.enquirica.com/index.php?option=com_content&view=article&id=11&Itemid=13