(MENAFN- The Peninsula) Middle Eastern oil producers Saudi Arabia and the United Arab Emirates will sharply cut or even halt costly petrol imports next year after ramping up new refining capacities that put them a step closer to becoming exporters of the motor fuel.
The estimated loss of at least 60,000 barrels per day (b/d) in shipments to Saudi Arabia and the UAE is expected to be mitigated by strong global demand that will help replace revenue lost by sellers such as trader Gunvor, French major Total and India's Reliance Industries.
And while the dwindling imports may point to a coming change in trade flows as other Middle East refining projects come online, the market currently looks strong enough to withstand the relatively small loss in daily seaborne purchases.
"Most of the counterbalancing will be done by lower exports from surplus countries, either because domestic consumption is growing (such as in India) or because the refining sector or yields are shrinking (such as in OECD markets)", said David Wech, managing director of consultancy JBC Energy.
Organisation for Economic Co-operation and Development (OECD) countries Japan and Australia, for instance, are cutting refining capacities due to shrinking domestic consumption and more cost-effective imports.
Petrol exporter India is likely to reduce overseas sales to cater to growing local use of the fuel. Total and Gunvor could also sell more into other Middle Eastern countries such as Egypt or nearby Pakistan, where petrol demand is strong, traders said.
ESAI Energy research agency expects global petrol demand growth to accelerate by 50,000 b/d to 420,000 b/d this year, the principal reason overall oil demand growth will be higher this year than in 2014, it said in a June note.
"The unusual strength in gasoline had overturned some analysts' reports in 2014 which said gasoline would be bearish (this year) due to overcapacity," said a Singapore-based oil products trader. "Overall, gasoline's crack this year should end at the same levels seen in 2014 if not higher."
Asian petrol cracks hit their highest in at least six years on June 11 at about $19 a barrel. The drop in petrol imports from the two oil powers is a blip compared with the 24m b/d the world will consume this year, and less than 20 percent of the nearly 400,000 b/d taken by Asia's top importer Indonesia.
Still, the UAE is adding another refinery at Fujairah and the Saudis another 400,000-b/d unit at Jazan before 2018, meaning the days of the region being an import destination could be numbered.
State-owned Abu Dhabi National Oil Co has already more than doubled its refining capacity to around 830,000 b/d this year. And once it stabilises operations at a new residue fluid catalytic cracker, it will choke off imports estimated at about 50,000 b/d. Saudi Aramco's petrol imports are already in decline after it started up two 400,000-bpd refineries over the last two years.
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