Raymond James: Chinese oil demand strong, and India is not far behind

By OGJ editors

HOUSTON, Apr. 28 -- Exploding Chinese oil demand is providing support for current oil price strength, and Indian demand as a percentage of global oil demand has increased form 1.8% in 1990 to 2.8% in 2000, the St. Petersburg, Fla.-based Raymond James & Associates Inc. reported.

The International Energy Agency recently revised upward its Chinese demand forecast for 2004 to about 600,000 b/d of oil demand growth for estimated 2004 Chinese oil demand of 6.05 million b/d, or 10.5% higher than in 2003.

"What we find amazing about this new forecast is that it is still well below the recent February data that suggests Chinese demand is actually growing at a year-over-year rate closer to 1 million b/d (an annual growth rate of over 18%)," said RJA analyst Marshall Adkins.

He believes that most forecasters are underestimating Chinese demand on a 2004 full-year basis.

"Even if China's economic expansion moderates, we think its oil demand will grow by more than 700,000 b/d this year, implying a very strong 14% annual growth rate," Adkins said.

India
Looking longer term, energy investors should note that India is beginning to exhibit similar traits to China, he said. RJA said Indian oil demand is steadily growing and could reach 3% of global demand in 2004.

"India's recent past shows one of the best economic track records of any country in the world. Due to a rapidly rising population, robust foreign investment and expansionary fiscal policy, its intermediate-term growth prospects are excellent," Adkins said.

A large proportion of Indian private and public investors are targeting energy-intensive sectors such as construction, heavy manufacturing, and petrochemicals. Meanwhile, India's rising middle class will buy an increasing number of automobiles, boosting gasoline demand.

"Consequently, even though India is starting from a smaller oil demand base than China, their longer-term growth rates could be very similar," Adkins said.