Dubai, April 10 - A slump in oil prices abruptly ended rapid economic expansion in the Middle East Gulf, but tea demand could be boosted as consumers cut spending and stay at home, the head of Dubai's tea industry body said on Thursday.
Oil is trading around $50 a barrel, nearly $100 below the record level struck last July, casting gloom over the world's top oil exporting region.
The strain of the slowdown may have consumers in the Gulf reaching for teapots more often, said Sanjay Sethi, the head of the Dubai Tea Trading Center (DTTC).
"There is anecdotal evidence to suggest that during times of economic recession people drink more tea at home to calm down," Sethi said. "And I expect that demand will be higher this year."
In Dubai, tea trade in 2008 was 148.6 million kg, up from 144.6 million kg a year earlier, Sethi said.
Tea prices have stayed firm while most other commodities have declined with the slowing economy, he said. Dry weather has crimped supply from many of the top producing countries.
The DTCC was formed in 2005 and is a subsidiary of the Dubai Multi Commodity Centre (DMCC), which was established by the Dubai government to promote commodity trade in the emirate.
"Our main goal is to position Dubai as a trading hub for tea and not to make profits from buying or selling the commodity, we are just a facilitator," Sethi said.
The DTTC warehouse has around 3 million kg in storage, up more than 40 percent on the year, after it opened a new warehouse last month, he added.
The facility offers 5,000 tonnes of storage capacity where producers can store tea up to 60 days free. The DTTC also expects to expand its capacity for blending and packaging tea bags over the next few weeks, he said.
The DTTC, which has 42 tea-trading members, promotes trade between 13 major exporters including Kenya, India, Sri Lanka, and China and the Middle East, Eastern Europe and Asia.
The DMCC has no plans to launch a tea futures contract in the near future, said Sethi.
"The real challenge of having a tea futures contact is how to standardize all the different types and grades of tea so I don't see this happening soon," he said.