Unrest, oil price ‘top’ Asia-ME energy talks

Unrest, oil price ‘top’ Asia-ME energy talks Kuwait meet April 17-19

KUWAIT, April 15, (Agencies): Arab-world tension and its latest implications for oil prices are certain to be at the forefront of weekend talks bringing together dozens of Asian and Middle Eastern countries, including top producer Saudi Arabia.
The two regions are increasingly linked by Asia’s growing thirst for energy, which the Middle East’s mammoth oil and gas reserves can slake.
Oil use in developing nations, led by China, is expected to surpass that of the developed world by 2020, according to the US government.
Already, China is a top customer of state-run Saudi Aramco, at times eclipsing the United States as Saudi Arabia’s biggest buyer.
Ties are also starting to go beyond a merely commercial relationship as Asia plays a bigger role in global politics.
“The Gulf nations understand that the international arena is changing, that power has shifted to some degree and that they must pay attention to this,” said Christian Koch, Director of International Studies at the Gulf Research Centre in Dubai.
For now, the United States remains the most important ally of many Middle Eastern Arab states, but Asian countries are building a presence, helped in part by new institutions such as the Group of 20 (G20).

Focus
While the focus of round table talks beginning in Kuwait at the weekend will be on energy, more than ever it is inseparable from politics as consumer countries assess the implications of conflict in OPEC member Libya and political unrest elsewhere.
Until violence erupted in Libya, the country was pumping around 1.6 million barrels per day (bpd).
Leading exporter Saudi Arabia has the capacity to make up for that, but some analysts have voiced concern about how much room for manoeuvre that leaves.
Deutsche Bank in a note said it could push the level of OPEC spare capacity that can quickly be added to the market below the level of 2 million bpd — or about five percent of world demand — considered in the trade as the necessary margin of comfort.
It drew a comparison with the rally of 2008, when US crude hit a record of nearly $150 a barrel at the same time as spare capacity shrank to a low of around 1 million bpd.
The 2008 rally was followed by a record crash to less than $40 a barrel, then a gradual recovery before this year’s price surge, which took Brent to a two and a half year high above $127 a barrel at the start of this week.
Since the previous Asian Ministerial Energy Roundtable in Tokyo in April 2009, crude oil prices have more than doubled.

OPEC ministers attending this April’s round table are not expected to take any action, although they may reiterate assurances to their consumers that they can provide enough oil if there is demand for it.
So far they have said the market has plenty of supply and industry sources have said a new crude blended by Saudi Arabia to compensate for lost Libyan barrels met limited buying interest.
The Organization of the Petroleum Exporting Countries does not meet to formally reconsider its output policy until June.
In any case, its ministers have said the market is being driven by speculation rather than shortage, but some analysts warn of supply tightness as the northern hemisphere moves towards a period of higher demand.
“The world oil market does not need palliatives on supply, it needs crude ahead of the summer driving season,” said Lawrence Eagles of JP Morgan in New York.
Asian oil demand has been distorted by a series of earthquakes and a tsunami in Japan a month ago, which triggered a nuclear disaster.

Demand
Japanese refineries were shut, stoking demand from elsewhere in Asia for extra diesel, and the damage to nuclear power has boosted requirements for sweet crude, which can be directly burned for power.
As Middle Eastern nations seek to maximise the amount of oil they can export throughout Asia and to other lucrative foreign export markets, some of them are still intent on developing nuclear power themselves.
South Korean firms were part of the winning consortium that will build four reactors in the United Arab Emirates, which the country says will go ahead despite events in Japan.
Meanwhile, oil prices surged to new heights Monday, with Brent crude topping $120 a barrel for the first time since Aug 22, 2008, as traders eyed a raging rebellion in oil-exporter Libya.
New York’s main contract, light sweet crude for delivery in May, closed at $108.47 a barrel, a gain of 53 cents from Friday.

In London, Brent North Sea crude for May delivery leaped $2.36 to settle at $121.06, after topping at $121.29 just before the session close.
The market kept a focus on fighting that continued Monday in Libya between rebels and forces loyal to leader Moamer Kadhafi.
Rebel fighters made a new attempt to recapture Brega, advancing to the outskirts of the oil refinery town only to be forced back under artillery fire.
Before the crisis, Libya exported 1.3 million barrels a day of crude oil, more than 1.5 percent of global demand, in large part to Europe. Those exports have dwindled to a trickle amid the uprising.
That makes Brent crude futures, the European benchmark contract, more sensitive to the situation in Libya than the US market, where crude oil reserves are abundant.

“The longer these battles are going on, the more the market is realizing the supply is going to be offline,” said Matt Smith of Summit Energy.
Unrest in other parts of the Arab world also contributed to the rise in oil prices, he said.
“Yemen is such a big threat at the moment because of the proximity” with Saudi Arabia, the biggest oil producer in the OPEC cartel, he said.
“Things in Bahrain have calmed down a little bit but any further unrest could press prices higher.”
In Gabon, sub-Saharan Africa’s fourth-largest oil producer, a strike by oil-sector employees had halted almost all oil production.
Gabon’s oil daily output normally ranges from 220,000 to 240,000 barrels.
“It is not a lot of oil but given the current situation we can’t afford any more outages, so all the barrels are important,” Kilduff said.

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