Thursday, 10 December 2015

Oil prices to benefit Asian EMs, refining hubs

The slump in oil prices to levels not seen since the global financial crisis has fanned expectations of deflation, hammered economies of producers and flattened share prices of once high-flying energy companies. 

But according to one analyst, lower oil prices could actually help some emerging market economies and refiners by lifting disposable incomes and improving margins. "Cheaper feedstock costs will support refining margins, while lower import costs will encourage greater consumer spending, driving economic growth in the emerging economies," said Peter Lee, Oil & Gas Analyst at BMI Research on Tuesday. 

US WTI and Brent crude oil prices are trading around seven-year lows, tanking after OPEC last week decided not to cut its 30-million-barrel a day production ceiling to support depressed energy prices. Major producers of refined fuels in Asia include South Korea, Singapore, Japan and Taiwan that rely on crude oil imports to supply the sector. 

"Regional demand for oil products at the higher-end of the barrel, notably gasoline and naphtha, remains strong, providing opportunities for refiners to capitalize on higher margin products," said BMI's Lee.

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