Distillates In Floating Storage To Be 'Overwhelming' in 2010 -Economist

SINGAPORE -(Dow Jones)- The global glut of middle distillates in floating storage will "continue to be overwhelming" in 2010, Edward Morse, chief economist for Louis Capital Markets, said. Speaking Tuesday at the Asia-Pacific Petroleum Conference in Singapore, Morse said floating storage would likely reach 75 million-85 million barrels next year, enough to satisfy world demand for a couple of days. Demand for diesel was recently driven by the need for power generation in China, India and the Middle East, he said. However, high prices for crude oil in 2008 sparked a wave of investments in sophisticated new refineries in China, India, Russia, the U.S. and in the Middle East, which led to overcapacity, he added. "Overcapacity has been driven not by economic, but political factors," he said. Surplus refining capacity, currently 7 million barrels a day, is expected to continue growing, he added. Although world demand for middle distillates will eventually recover with the global economy, it won't grow quickly, he said. "The world as a whole will come out of this with a lower percentage demand path," he said. By Wayne Ma, Dow Jones Newswires; +65 6415 4065; wayne.ma@dowjones.com