Sep 02, 2013, 03.44 PM IST
Chinese economic data has been closely watched by oil markets because it is driving most of the incremental growth in oil that is projected for this year globally, says Vandana Hari, Editorial Dir-Asia, PLATTS.
Below is the edited transcript of Vandana Hari’s interview with CNBC-TV18
Q: Crude has cooled off over the weekend. In your interactions what the market expecting on Syria, what is the crude pricing in?
A: It is still very hard to predict as always the case with geopolitical tensions. In this case, there are at least three countries involved. We have seen Britain, France and US come together about a week ago to say that they wanted to launch the strike. But at the same time, we saw very strong opposition from Russia and calls from the UN that any action against Syria should go through the US Security Council.
What happens typically with oil markets is the participants in those markets do not tend to be political observers. So at best they can go with their estimations and conclusions based on all these headlines. But right now it is very hard to say whether the strike will go ahead and what impact it might have.
Q: Do you expect supply disruptions if there is a conflict that does take place in Syria?
A: It is a hard to say. One will have to be watching very closely if and when the strike does go ahead, what kind of a strike is planned, how Syria retaliates, how Iran retaliates because the bigger threat here rather than Syria’s retaliation which might be slightly limited in terms of oil impact has been what if Iran decides to block the Strait of Hormuz. We have seen that fear before in the past two-three years, but it didn’t happen. So, as I said it’s worst case scenario, but the market is not factoring that in yet.
Q: How much of a role do you think China’s recovering growth will play? We have got numbers of Chinese PMI improving today?
A: The Chinese economic data has been closely watched by oil markets because it is driving most of the incremental growth in oil that is projected for this year globally. Over the weekend we saw Chinese official PMI numbers, which represents the strength of the industrial activity in the country and that come out at 51, which is above the 50 line that divides expansion from contraction. So, indicating that China’s industrial growth is still maintaining at a good clip. Essentially, if you look at China’s oil demand for the first seven months of this year according to PLATTS’ calculations was about 4 percent high year on year.
As China’s history goes and in recent years we have seen double digit growth year on year in oil consumption; it is not huge but from a base of about 9 million barrel per day that still represents a healthy incremental demand for oil growth. So, that will definitely cause a slight uptick, some bullishness in the market but there is not just China but a lot of other economic data that the world is right now focusing on. The US has also issued some good economic data figures from last week but Europe is still in the doldrums.
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