CRUDE WINNERS

Asian oil buyers see gains from Opec’s rift over production.

SEOUL: Oil buyers in Asia are sure they will emerge as winners from Opec’s rift over production.

Members of the Organization of Petroleum Exporting Countries will gather on Friday in Vienna, where Iran has said it will announce plans to boost production by 500,000 barrels a day.

That may further lift the 12-member group’s output, which has exceeded its target for 17 months. The increase in volumes would exacerbate a global glut and benefit the biggest oil-consuming region’s refiners, which are seeking cheaper sources of crude.

Opec is forecast to stick with its strategy of defending market share by maintaining output and driving down higher-cost production elsewhere, according to analysts and traders surveyed by Bloomberg. That will leave members including Saudi Arabia free to continue pumping even amid calls from Iran to make room for its extra supply after international sanctions over its nuclear program are lifted.

“This is probably the best time we have ever had as a buyer,” said Kim Woo-kyung, a spokeswoman for SK Innovation Co, South Korea’s largest refiner. “We are enjoying an overflow of oil.”

Opec has exceeded its output target of 30 million barrels a day since June 2014 as it pumps near record amounts of crude, boosted by increases from its biggest members, Saudi Arabia and Iraq. The group’s strategy to defend market share has helped lift refining margins for Asian processors, who have been treated to a steady flow of cheap cargoes from the Middle East to Mexico, Nigeria and Russia.

While oil’s decline has spread to fuels such as petrol, the pace of crude’s slide has been faster. Spot prices of the motor fuel loading from Singapore have fallen about 37% over the past year, compared with a slump of about 45% in Dubai crude, a benchmark for shipments to Asia. Additionally, cheaper fuel has boosted consumer demand for the supplies that refiners sell.

“Refining margins in Asia have stayed very strong, certainly much stronger than in 2014, largely because feedstock prices have dropped significantly,” said Victor Shum, a vice-president at IHS Inc in Singapore.

Brent crude, the benchmark for more than half the world’s oil, has dropped about 21% this year after falling by almost 50% in 2014.

The Asia-Pacific region will consume 31.87 million barrels a day of oil in 2015, exceeding demand of 31.28 million barrels from the Americas, the International Energy Agency said in a recent report. China, India, Japan and South Korea will be among the biggest users of oil.

“For six months to a year, I see markets flush with supply,” said Naveen Kumar, general manager for international trade and supplies at Hindustan Petroleum Corp, an Indian state-run processor. “As a refiner, low crude prices are benefiting us, so we would continue to hope for prices to remain low.”

Oil prices may drop to as low as US$25 a barrel unless Opec takes action to stabilise the market, Venezuelan Oil Minister Eulogio Del Pino said this week. The Latin American nation and Algeria are among Opec states most affected by crude’s slump and have long urged fellow members to curb output. Saudi Arabia, the world’s largest crude exporter, led the group to switch its strategy in November 2014 to focus on pressuring competitors.

“It is obvious that everyone will continue with their output because they have to sustain their economies,” said H. Kumar, managing director of India’s Mangalore Refinery & Petrochemicals. “This era of everyone sustaining output will continue and this is good for refiners.”