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Singapore — Healthy economic growth will likely continue driving Asian oil and fuel demand growth in the coming decades, but the strong uptrend in international crude prices this year and the recent sharp depreciation in emerging market Asian currencies could hit regional consumer confidence in the short term, industry executives and market sources said Tuesday.

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Non-OECD and emerging market Asian economies continue to post GDP growth of more than 4% a year. India and China, in particular, would lead Asian economic and oil demand growth at least over the medium term, Reliance Industries' President of Refining and Marketing Harish Mehta said at the S&P Global Platts Asia Pacific Petroleum Conference in Singapore.

"Good news for refiners is that India for one, oil demand won't subside [for the next few decades]," Mehta said, indicating that South Asia's biggest energy consumer's oil and crude demand would grow to 480 million mt by 2040.

However, rising costs and fuel price inflation propelled by sharp depreciation in various Asian currencies might affect consumer spending patterns, industry executives and top officials said during the panel discussion at the conference.

"We are not only witnessing international oil prices rising but also emerging market Asian currencies weakening fast...leading to a rapid rise in consumer prices at the pumps," International Energy Agency Director of Energy Markets and Security Keisuke Sadamori said.

Keisuke added that the growing cost burden on consumers in emerging Asian economies would eventually bear down on the region's oil and fuel demand growth in the near term.

Managing director and global head of commodities at Citi Research Edward Morse said large sums of equity capital and foreign funds were rapidly flowing out, accelerating the currency weaknesses in key emerging Asia economies.

"This will impact oil demand growth in the emerging market Asian economies," Morse said.

Reliance's Mehta also acknowledged that the double whammy of rising crude prices and the falling rupee had propelled the recent surge in retail gasoline prices in India.

The Indian currency remains one of the biggest underperformers in the Asian foreign exchange markets this year. The rupee hit all-time low of 73.01 to the dollar on September 10, a 16% fall since the start of 2018.

Latest data from state-owned Indian Oil Corp. showed that unleaded gasoline in New Delhi averaged Rupees 80.94/liter so far in September, around 4.7% higher than the average of Rupees 77.33/liter for the whole of August.

During the first half of the year, the retail pump price in the city averaged Rupees 73.84/liter, the data showed.

The IEA's Sadamori also said many of the Asian economies hit by sharp currency depreciations recently, including Indonesia, had only recently removed government fuel subsidies.

The Indonesian government is facing many difficulties taming the country's rapidly widening current account deficit due largely to the sharp depreciation in the rupiah and the strong uptrend in international crude prices.

The rupiah fell below 15,300 to the dollar early this month to hit a fresh 20-year low, while front-month ICE Brent futures rose above $80/b earlier this week to hit near four-year highs.

TIGHT SUPPLY IN ASIA

Fragile consumer confidence may not necessarily put the brakes on the broader Asian gasoline market's bullish momentum in the third quarter, with tight supply contributing to higher prices and cash differentials across regional spot markets, traders said.

The FOB Singapore 92 RON gasoline price hit a four-month high Monday, when it was assessed at $89.19/b. It was last higher on May 22, when it was assessed at $89.78/b.

Prices have remained firmly above $80/b since July 23.

In China, gasoline exports for September are slated to fall due to more lucrative prices on the domestic market, compounding tight supply in the Asian gasoline market, sources said.

Planned exports are slated to be at least 168,000 mt less in September than August, while China's peak consumption season is typically September-October, and state-owned Chinese oil major Sinopec has just purchased five Medium Range tanker cargoes of gasoline to import for September and October delivery, sources said.

In addition, onshore light distillates stocks, mainly gasoline and blend stocks, in Singapore, which has the largest commercial oil storage capacity in Asia, hit their lowest in nine and a half months for the week ended September 12, International Enterprise Singapore data released last Thursday showed.

-- Gawoon Phil Vahn, phil.vahn@spglobal.com

-- Mriganka Jaipuriyar, mriganka.jaipuriyar@spglobal.com

-- Wanda Wang, wanda.wang@spglobal.com

-- Edited by Jonathan Dart, newsdesk@spglobal.com