China Set To Surpass Japan As Oil Consumer In
2004
With its oil needs growing by nine percent annually,
China is on track to surpass Japan as an oil consumer
in the second half of 2004, according to a report released
by the International Energy Agency. China's demand for
crude has accounted for 35 percent of the growth in the
world's demand for oil this year. It projects that this
will fall off slightly to 30 percent in 2004, mainly because
the world's other economies are beginning to show signs
of picking up steam.
Futures contracts rose in October by an average of $2.05
per barrel for light, sweet U.S. crude and $2.57 for North
Sea Brent crude. December contracts of U.S. crude were
trading on Nov. 13 at $31.55 on the New York Mercantile
Exchange, while contracts of December Brent were trading
at $29.20 on the International Petroleum Exchange in London.
World oil output surged in October by 1.2 million barrels
a day to 80.9 million barrels, the IEA said. Output by
the Organization of Petroleum Exporting Countries rose
by more than 400,000 barrels a day to 27.2 million barrels.
Iraqi production accounted for nearly half of this increase,
although the recovery in Iraq's output slowed compared
with the three previous months, the report said.
Supplies from Russia and other non-OPEC producers grew
even faster, with 725,000 more barrels a day in October
than in September, it said.
OPEC members, which agreed to cut output by 900,000 barrels
a day starting in November, plan to meet Dec. 4 to reassess
market conditions. If they decide then to make deeper
cuts, the IEA said they are unlikely to win over non-OPEC
producers to such a strategy unless prices fall "substantially."
Chinese demand has been driven by industrial and consumer
demand for oil. Chinese consumers have shown strong demand
for automobiles this year. Although the Chinese government
has had various incentives for auto purchases over the
past five years to spur sales, the effect has not kicked
in until this year, following the SARS crisis in May.
Vehicle sales are expected to total more than 4 million
this year, making China the world's third largest auto
market after the US and Japan.
The IEA projects that China will need 350 million tons
of crude by 2010, with 200 million tons supplied by domestic
sources and 150 million tons from overseas sources. More
than US$1 trillion will need to be spent every year to
upgrade the country's transmission and distribution network
to meet demand.
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