Thursday, Aug 13, 2015

Dubai: De-valuation in Chinese currency is expected to have a limited impact on the world’s biggest oil consumer’s behaviour in oil markets and its imports from UAE or GCC, analysts said.

“The give-up that we have seen over the last couple of days is reasonable, it won’t necessarily change the Chinese strategy from whom they import their oil or how much they buy,” Gary Dugan, chief investment officer at National Bank of Abu Dhabi told Gulf News.

“Only when we see a 10-20 per cent on currency, we would start to see a meaningful impact in either direction of trade,” he added.

In the face of a 50 per cent drop in Brent prices since 2014, a near 6 per cent depreciation in Chinese Yuan would have a very limited impact on its behaviour in the oil market.

“The Chinese government is still building strategic reserves and this process is likely to continue. So while we should see a limited impact on Chinas crude imports from the UAE and GCC we could potentially see increased competition for refined products,” said Ole Hansen, head of commodity strategy at Saxo Bank told Gulf News.

Just as for other products, with the yuan devaluing, China will have gained a competitive edge and refineries may well try to take advantage by increasing exports of products, he added.

As a glut driven by surging output from US shale fields and Opec producers dragged down benchmark oil prices over the past year, China sought to take advantage of the slump and build a strategic petroleum reserve to stock emergency supplies. Those purchases by the world’s second-biggest oil user may help alleviate a global oversupply estimated by Goldman Sachs Group Inc. at about 2 million barrels a day.

Chinese imports have already jumped 7.5 per cent in the first half of 2015.

Recovery:

“The outlook is still primarily determined by Opec’s current policy of producing more oil than is required. This together with the resilience among US producer should ensure low oil prices for an extended period of time,” Hansen added. The IEA does not see the supply and demand begin to balance properly before the end of 2016, not least considering the expected return of Iranian oil sometime next year.

Brent crude may recover but the upside is limited till $54 per barrel, Osama Al Ashri, member of British organisation, Society of Technical Analysts.

On Thursday, Brent crude traded at $49.78 per barrel, up 0.24 per cent.

By Siddesh Suresh ?Mayenkar Staff Reporter

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