Singapore (Platts)--14Jul2005

Morgan Stanley's respected Hong Kong-based economist Andy Xie has been
pounding the table with clients this week, arguing Asian demand for oil is
already declining and could very soon lead to a collapse in prices. 

"At some point, the oil market will abandon the fiction of endless Asian or
Chinese demand, and when the expectation turns, oil prices are likely to
collapse," he wrote in a note to clients this week. 

Statistics from several countries already reflect weakening demand. China
reported that it imported 1.3% less crude, and 21% less refined products than
June 2004, and statistics for each  of S Korea, Taiwan, Thailand and India are
all weaker, he said. Substitution effects are also apparent. "Chinese data
give an unmistakable picture that the demand for diesel for generating
electricity has eased due to the rapid increase in coal-fired power plants.
China is essentially substituting oil with coal," he wrote. Japan's import
data for Jan-May 2005 also reflects a 2.1% fall in petroleum imports, but 7.1%
higher LNG imports, he said.