GCC & Asia: Widening And Deepening Trade Interdependence
BMI View: We expect the GCC's reliance on Asia as a destination for its oil exports to deepen over the coming years, as the traditional destinations of Europe and the US see little growth in hydrocarbon imports. We also forecast the GCC to become a key metals exporter as the region seeks to diversify earnings away from oil. Finally, despite nationalisation efforts, we expect the GCC to remain a key source of remittance earnings for much of South Asia as construction activity in the Gulf continues apace.
Economic relations between the Gulf Cooperation Council (GCC) and the larger economies of Asia (primarily Japan, South Korea, China and Japan) will continue to develop and diversify. The relationship between the two blocs has traditionally been in hydrocarbons, and while we see energy links continuing and expanding, there are several other sectors where we see growth potential, most notably in construction, remittances and metals.
Oil exports from major GCC producers to Asia have increased over the last decade, as the traditional demand markets of Europe and the US have seen a slowdown in import growth. The US has benefitted from a significant increase in oil output due to its highly successful shale developments, lessening its requirement to import lighter crude oil blends. While the Middle East generally produces slightly heavier crude slates, there are few options to increase oil exports to North America with the region being increasingly well supplied. Furthermore, if the construction of the Keystone XL pipeline moves forward, exporters such as Saudi Arabia will face greater competition for market share from Canadian producers. Similarly, European oil demand is stagnating due to the aftermath of the recession, growing energy efficiency and a decline in demand from the increasingly uncompetitive refining sector. While Europe will remain a major oil import market, oil consumption growth is expected to remain largely flat.
|Eastern Shift In Oil Demand|
|Global - Net Oil Imports By Region (mn b/d)|