Eswaran Ramasamy-- Global Editorial Director Platts

Summary:

The shale and tight oil revolution has transformed the global petroleum market. Five years ago, the United States was both the world's largest consumer and importer of oil. Today, it is a major source of oil supply. While the United States is still dominant in terms of demand, the Asia-Pacific Region especially China and India have witnessed significant growth in demand in recent years. The strength of Middle East demand however, is often underestimated, mainly because the region is commonly thought of as a producer not a consumer.

The increase in supply from the United States has been driven by the production of shale and tight oil. At the same time, energy consumption in the US, which has historically been high, is also slowly falling. This has meant that suppliers of light sweet crudes, which have seen their exports displaced by shale oil, have switched to supplying new markets like China where energy consumption, while still lower than that of the United States, is growing very rapidly.

Although the United States forbids the export of crude oil, gas is allowed to be exported, and US exports of LPG are growing rapidly. The US is also witnessing growth in petroleum production, which will result in more exports of oil products like diesel, which will hit the global market even as Asia and the Middle East add refining capacity. China's oil refining capacity is growing at an average rate of 600,000 barrels/year and India at 200,000 barrels/year. The Middle East is second only to China in terms of new capacity which is expected to grow by 20% in 2016. These two factors will likely have a huge impact on Asian oil markets.