In view of bearishness in Crude Oil, suppliers are focussing on Asian markets to absorb surplus.Barclays noted in a weekly report that global oil consumption has slowed down to 0.61 mn barrels per day in in 2014, the slowest since 2009, when declined by 0.55 mb/d.

Weakness in Chinese oil consumption (growing this year at the slowest rate since 1990) is part of the reason for the weak overall number. Despite flat growth from China due to reduced domestic diesel appetite and declining demand in Japan, as less oil gets used in power generation, the rest of Asia still accounts for more than half of global demand growththis year.

Asia therefore is a core focus among suppliers as an outlet for the oversupply of crude in the Atlantic Basin. The oversupply has built since July; as Libyan output recovers, more West African crude oil barrels get displaced from North America, and North Sea crude oil gets fewer bids from European refineries that have reduced runs. With the focus on Asia to help clear the supply overhang, OPEC producers are taking steps to ensure market-share in the region over the short and medium term.

Saudi Arabia and the UAE have recently reduced their selling prices to Asian refineries, with attractive discounts in their formulas to help market the crude. For November crude loadings, the Kingdom has adjusted prices to multi-year lows. Based on official selling prices released this week, Iran is set to sell its crude to Asia in November at the biggest discount in almost six years. The discounts are given to balance regional differentials vs. other grades
linked with Brent-Dubai, as well as maintain market share.

Long-term crude marketing strategies are also being formed to gain and maintain market shares in Asia. Kuwait and the UAE are offering attractive deals to fill India’s strategic petroleum reserve (SPR) next year. Japan is set to count half of the leased storage held by producers (UAE and Saudi Arabia) as Japan’s secondary national SPR.

"We are bearish for Brent crude oil and, in the absence of basing signals, we look for the downward trend of the past three-and-a-half months to extend towards initial targets near 89.60. Breaking below there would open the more important 88.49 range lows from 2012,where we expect to find buying interest. It would take a move above 95.85, the 21-day average, to suggest an interim base and that we are entering a period of correction/consolidation. For now, the focus remains lower."
Source: Barclays