Singapore/New Delhi, Feb 24 Asia’s oil markets are being upended as India’s and China’s refiners overtake once-dominant buyers like Japan and challenge the United States as the world’s biggest consumer. The shifts are not only establishing new trade routes but are also challenging the way oil is priced in the region as the new players push for more cash cargoes and fewer long-term deals. China and India’s combined share of world oil consumption has tripled since 1990 to over 16 per cent, nearing the US share of roughly 20 per cent, cementing their status as the main centre of global demand growth. “Asian oil markets are in a tremendous period of flux,” said Owain Johnson, managing director of Dubai Mercantile Exchange (DME). By 2040, China and India could double their share again to a third, analysts say. One of Asia’s rising traders is Indian Oil Corp, which operates 11 refineries with a combined capacity of 80.7 million tonnes a year (1.9 million barrels per day), a third of India’s capacity and roughly the same size as Exxon’s US refining base. “Spot crude (trading) gives more flexibility and more variety is available. Last year we raised spot purchases and for this year we are working out a strategy,” said AK Sharma, its head of finance. The changes come at the expense of western majors, with Shell complaining in December that aggressive trading, conducted by Chinese companies, meant Asian crude prices didn’t properly reflect the market. “Chinese oil companies have become the new power houses in oil trading,” said Oystein Berentsen, managing director of crude at Strong Petroleum in Singapore. Previously, Asia’s largest oil buyers from Japan — which once accounted for about 10 per cent of global demand — stuck with long-term contracts. Now, as China and India take the lead, a growing share of trading is done on a spot basis as buyers prioritise cost and delivery flexibility over fixed shipment schedules. Moreover, thanks to the hefty volumes, the new buyers are able to extract favourable prices. China and India’s combined daily net crude imports exceed 10 million barrels, or some three million bpd more than top importer the United States. The new buyers are also bringing new characteristics to the marketplace. “Indians are more flexible than many of their Asian peers, buying up distressed or stranded cargoes when there’s a profitable opportunity,” said Ivan Szpakowski, head of Asia commodity research at Citigroup. “India will become the biggest source of oil consumption growth. Its geography also changes trade flows. If you look at a map, the Middle East is much closer to India than to Japan or China and such shipments are effectively short-haul.” In China, state-owned oil giants have been joined by nearly 20 independent refiners which have been granted import licences and exclusively buy spot supplies. Their arrival is changing trade flows through their preference for cheaply-delivered Russian crudes which has helped Russia challenge the Middle East as China’s biggest supplier. Not all is smooth sailing. Richard Gorry, director of JBC Energy Asia, said the rise of these traders is causing ‘teething problems’ as they make their first deals with highly regulated international companies.