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To: Charles A. King who wrote (9838)	9/14/1998 8:39:00 AM
From: Charles A. King	Read Replies (1) \| Respond to of 13091

The weakness in crude oil prices this summer stemmed from unexpectedly low demand in the Far East. nando.net Asian oil industry meets at worst of times Copyright c 1998 Nando.net Copyright c 1998 Reuters News Service SINGAPORE (September 13, 1998 11:37 a.m. EDT nandotimes.com) - Key Asian oil industry players will gather in Singapore this week at the sector's worst time in a decade, marked by crumbling prices and shrinking demand. The bruised industry is fighting back with drastic production cutbacks of a kind unseen since the last oil crisis in the mid-1980s. But at the three-day 14th Asia Pacific Petroleum Conference, which begins on Monday, participants are likely to put on a brave front, banking on a La Nina-induced bitter winter to spur demand. There will be fewer free cocktails on hand to help fuel optimistic sentiments, however. The tough times have hit company coffers hard and many traditional sponsors of cocktail parties have pulled out. "It's not like in the old days when you could hop from one party to another," said one oil trader, recalling the days when a Japanese company flew in geisha girls from Tokyo just for the occasion. Today the industry is battling for its survival. Refiners in Singapore, the bellwether for the industry in Asia, have reined in production to almost half the 1.25 million barrel-per-day (bpd) capacity as margins plummetted to their lowest levels in a decade. Elsewhere, Japanese, Korean and Thai refiners all trimmed output by between 10-30 percent as domestic demand fell victim to the regional economic turmoil. In July, the International Energy Agency (IEA) said Asian oil demand in 1998 would shrink for the first time in years to an estimated 19.77 million bpd, down by 60,000 bpd. But the latest figures from several Asian countries show a sharper fall in oil consumption, with Thailand seeing a 5.8 percent drop in the first seven months of 1998 from a year ago to 876,000 bpd. South Korean July fuel consumption shrank by a hefty 14 percent to 1.6 million bpd from July last year. In its latest monthly report, issued on Friday, the IEA lowered 1998 demand growth in China to 4.0 percent from a 7.7 percent forecast in July. In 1997 demand grew by 10.1 percent from a year earlier. "Slower Chinese apparent oil demand growth is consistent with indications of a cooling economy, which is being mirrored in marked deceleration in the demand for electricity," the IEA report said. The fall in consumption by China, Asia's largest oil importer, sent the industry into a tailspin in the second half of the year after it month-after-month failed to import fuel in a big way. "This market can only turn if China comes back to buy in a big way. Until then any price recovery will be short-lived," one trader in an oil major said. On the eve of the major oil meeting, oil product prices staged an unexpected rally as the refinery cutbacks finally paid dividends amid firmer crude prices. Prices of gas oil or diesel, which make up to 60 percent of a refinery's output, rose by about 15 percent in one week as buyers emerged to cover short sales as the cutbacks began to bite. But traders said the rally was dealt a blow by an announcement from Beijing on Saturday that China will temporarily ban all diesel imports from September. "This (ban) will hit the market when it trades on Monday because part of the reason for the tightness was due to Chinese imports," a trader said. By RAJ RAJENDRAN, Reuters