If we look at India as an example, it has a significant amount of refining capacity planned for 2024-2025. but after that, there’s nothing concrete on the horizon. The Indian economy is expected to grow significantly, becoming the largest incremental source of demand globally by 2026, but beyond 2027, refining capacity in the country may not be able to handle the demand. Europe, on the other hand, is heading in the opposite direction, with three refineries scheduled to shut down next year. Middle East regional players could capitalize on this, especially with diesel flows, as the refineries being shut down are mostly focused on middle distillates. The gap between investments in Asia and Europe is stark, presenting a major opportunity for those who can exploit these dynamics.
Has the increase in Russian crude flows to Asia redrawn the oil trading map?
It is a permanent shift. Even if US-Russia relations improve, European sanctions are unlikely to lift anytime soon. India will continue buying discounted Russian crude because it offers a competitive edge, as will China. And with refinery margins now shrinking, there’s an added inherent competitive advantage for refiners in those countries to continue buying Russian crude.
Have we seen peak China oil demand?
China’s situation is nuanced. While core products like diesel and gasoline are peaking, petrochemicals and LNG are still growing. The market has got used to the idea of perpetual growth. Now, as that growth slows, attention will shift towards India, which will become the focal point of consumption growth, especially in the second half of this decade. China will remain important, but interest will taper off as India rises.