India calls for Asian oil market

Published January 7, 2005

NEW DELHI, Jan 6: India, which imports most of its crude oil needs, called Thursday for the development of an Asian petroleum market with trading exchanges to serve the region's fast-growing economies and soften price volatility.

"It's essential we develop a sophisticated Asian market for petroleum and petroleum products" to ensure supply stability and reduce price volatility, Indian Oil Minister Mani Shankar Aiyar told a regional energy conference.

India, which has a vital interest in stable oil markets as it sources 70 percent of its crude oil needs abroad, hosted the one-day meeting in the Indian capital to promote supply security through regional linkages.

Booming economic growth has turned Asia into one of the main buyers of Gulf oil but a lack of partnerships between producers and consumers has made Asian nations vulnerable to global oil price volatility, participants said.

But at least one country said there was more oil in the market than needed. "The market is oversupplied. There is no doubting it," Iranian Oil Minister Bijan Namdar Zanghaneh told reporters after the meeting with Asian colleagues in New Delhi.

Other key fuel-guzzling nations such China, Japan and South Korea also attended the forum along with key oil-producers such as Kuwait, Saudi Arabia, Iran, Qatar, Oman, the United Arab Emirates as well as Malaysia.

Zanghaneh said that with the emergence of giant Asian consumers, the continent was "set to become the gravity centre of the world's energy consumption." He said that Asia contained the world's largest oil reserves.

India's Aiyar also urged setting up strategic storages and mutual investments to promote supply security. He said a regional market would spur transparent pricing, allow for derivatives trading and reflect "the real role in the global oil economy of Asian production, Asian consumption and Asian trade."

Zanghaneh said an "Asian crude market" could be formed through sustained dialogue. "Asian countries, especially rapidly-growing economies of the region, need long-term energy supply security.

Oil producing countries .. are concerned about demand security. This is where Asian interdependence may best serve the interests of all parties," Zanghaneh said. He said Asian nations should strive to establish a structure in which Asian producers would charge less to countries in the region.

Saudi Arabia, the world's biggest crude exporter, said it was committed to keeping spare capacity to meet the needs of Asia's fast-growing economies, calling the region the country's "number one customer."

Asian countries consume 40 per cent of global oil production of 82 million barrels a day with the percentage seen rising over the next two decades. Middle Eastern producers account for some 26 per cent of global oil production, a figure expected to jump to 31 per cent by 2025.

"It (Asia) is one of the fastest-growth markets for oil in the world, where half of the total incremental oil demand is forecast to take place during the next few years," said Yousuf Al-Ibrahim, special economic adviser to Kuwait.

"Development of partnerships between producers and consumers will go a long way to address mutual concerns about security both of supply and demand." China said it was vital to check oil price fluctuations as they hurt both consumers and producers.

"The surge in international oil prices leads to higher production costs in oil-consuming nations, and to some extent slows their economic growth. The rise of oil prices may also reduce oil demand," said Zhang Xiaoqiang, vice chairman of China's National Development and Reform Commission. Asian ministers said they were looking at investing in each other's countries to bolster linkages. -AFP

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