Business | Oil & Gas
China oil demand growth eases to 9.2% in August
China's implied oil demand rose 9.2 per cent in August, easing off four months of double-digit growth but still serving a reminder that one key factor behind oil's near four-year rally has yet to fade.
- Reuters
- Published: 00:00 September 26, 2006
Beijing: China's implied oil demand rose 9.2 per cent in August, easing off four months of double-digit growth but still serving a reminder that one key factor behind oil's near four-year rally has yet to fade.
Growing domestic refinery output and the likelihood of Beijing keeping fuel prices little changed amid falling crude may continue to prop up demand, analysts say, helping the world's number-two consumer beat forecasts of 6 per cent growth.
Supported by a warm summer and strong economy, implied oil product demand refinery output plus net fuel imports but excluding inventory changes which China does not report was 6.55 million barrels per day (bpd) in August, Reuters calculations based on official data showed.
"The economy, which has shown few signs of slowing down, should support oil demand throughout the fourth quarter," said Yan Kefeng, of Cambridge Energy Research Associates (CERA).
This could serve a piece of good news to a market desperate for proof of demand growth, after oil lost more than $17 since early August in its biggest decline in over 15 years, amid easing concerns over Iran and a mild hurricane season.
China's surprise 15 per cent fuel demand growth in 2004 was one main driver behind oil's rally to $70, before it eased to just above 3 per cent last year but quickened since the second quarter of 2006.
Economic indicators pointed to easing but still robust growth in industrial output and fixed-asset investment last month, after the world's fourth-largest economy expanded 11.3 per cent in the second quarter.
Leading the August demand growth was gasoline and fuel oil, up 14 per cent and 24 per cent respectively, though trade sources say some of the barrels may end up in dealers' storage tanks.
State refiners slashed exports of gasoline by 63 per cent in August, extending a year-long theme, in order to fuel the country's fast-expanding fleet of cars, sales of which rose 29 per cent in August and 32 per cent in the first eight months. Lured by an attractive margin to process fuel oil into much-needed diesel, China raised fuel oil imports sharply for the fourth-straight month by 56 per cent at 3.06 million tonnes.
Imports of kerosene, mainly aviation fuel, neared peak levels in August at about 557,000 tonnes and were up 89 per cent in the January-August period at 3.49 million tonnes as refiners maximised production of diesel at the expense of kerosene.
August crude imports rose 34.8 per cent from an unusually low rate a year earlier to 11.82 million tonnes (2.78 million barrels per day), in line with previously reported data, near the lowest this year as refiners stocked up in the first half.
But a sharp fall of more 20 per cent in global crude prices from its mid-July peaks may have already drawn Chinese buyers back into the market to restock as new refining capacity starts to come on line, analysts have said.
Chinese refiners may also be encouraged to boost throughput and in effect lift apparent demand due to recovering profit margins.
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