By Myra P. Saefong
While investors in crude futures and energy stocks cheered a
report Thursday tipping higher global demand through next year, a
closer reading shows the outlook may not be bright enough to
justify a recent rally.
The International Energy Agency raised its forecast for global
oil demand by nearly 500,000 barrels a day for this year and next.
The news helped lift benchmark crude-oil futures to $72 per barrel
in New York, the strongest intraday level since Aug. 28, with trade
on Globex during Asian hours sending the price to $72.35.
Oil shares in Asia also traded higher on the gains, with Inpex
Corp. up 1.4% and in Tokyo, while in Sydney, Santos Ltd. added 1.1%
and Oil Search rose 2.4%.
In Hong Kong, Cnooc Ltd. advanced 2.4%, while shares of
PetroChina Co. were 2% higher.
Those advances outpaced broader regional movement, with the
Nikkei 225 Average trading 0.9% lower in Tokyo, Hong Kong's Hang
Seng Index up 0.8%, Korea's Kospi up 0.4% and the S&P ASX 200
gaining 0.7% in Sydney.
But the bullish moves for crude and energy shares seemed to
ignore the IEA's caveat that "the underlying strength of [emerging
market] demand has been obscured by massive stock building in
China."
Some analysts said investors would wise to pay attention to this
concern over the difficulty in distinguishing between the China's
stockpiling of oil, which will eventually end, and its actual
demand growth.
"China is strategically stockpiling oil, and this is the biggest
driver for IEA expectations," said Kevin Kerr, editor of Kerr
Commodities Watch. "Chinese demand and stockpiling of energy
supplies remains a key concern for their ability to sustain at
least 8% growth."
The IEA itself admitted that the strength of Chinese oil demand
remained "elusive" and oil-product stockpiling "distorted China's
demand picture."
But despite this, the IEA chose to boost its demand forecasts
for China, saying its outlook "faces upside risks," but adding that
"without more detailed data, and in the face of likely continuing
oil price volatility, demand projections will remain prone to
substantial revisions."
Some analysts said the lack of such data created too many
unknowns.
"China has been obscuring the view on oil demand across all the
non-OECD countries," said Cameron Peacock, a market analyst at IG
Markets in Melbourne, and some of "the frustration out of China is
its lack of transparency and lack of clarity."
"China has the world's largest pool of foreign-exchange reserves
and is taking advantage of the weakening U.S. dollar to essentially
buy oil while it is on sale," he said.
But whatever the true picture of Chinese demand, Peacock sees
it, along with an improving U.S. economy as long-term positive for
oil.
Chinese economic data released Friday also seemed to reassure,
despite the risks of the IEA-induced rally, with the numbers
pointed to a quickening recovery.