China‘s oil demand up 4.5%; slowest fuel consumption growth in 4 years

In 2012, China experienced the slowest fuel consumption growth since 2008; however, according to the International Energy Agency (IEA), the country’s demand growth is expected to go up this year as China’s economy recovers.
On the other hand according to Reuter’s calculations, which are based on preliminary government data, China’s implied oil demand rose by 4.5% or 420,000 barrels per day (bpd) on the year. The figure is higher than IEA’s forecast for growth of 3.3%, or 301,000 bpd. December’s implied oil demand rose by 8.4% to a record 10.52 million bpd, which brings the full-year consumption to 9.66 million bpd. But the 4.5% annual increase was lower than the 6.3% growth of 2011, as well as the double-digit growth in 2010.
Implied demand ignores stocks changes and is seldom disclosed by the Chinese government; it is a combination of crude oil throughput and net imports of refined oil products. In its December report, the IEA estimated that China’s oil demand would be at 9.5 million bpd in 2012, 3.3% higher than the previous year.
For most of 2012, fuel consumption was sluggish in China, the world’s second largest oil consumer, which has been the driver of global oil demand growth in the last decade. But in September, as the world’s second-largest economy showed some signs of recovery, the country exhibited slightly higher figures. And as its economy recovered in the final quarter of 2012, it pulled out of a post-global financial crisis downturn, which has produced the slowest year of economic growth in China since 1999.
Official data showed that China’s economy grew by 7.9% in the fourth quarter from a year earlier, and the spike snapped seven straight quarters of slowing expansion. The country’s full year growth of 7.8% was just slightly higher than Reuters poll’s (7.7%) and the government’s own 7.5% target.
China’s refinery throughput rose by 8.4% in December over a year ago, and grew by 3.7% for the whole of 2012, which was still lower than the previous year because demand eased as the economy became sluggish.
According to the National Bureau of Statistics Refineries, as a new refining capacity came on stream, China processed 43.12 million tons, or a record 10.15 million barrels per day (bpd) of crude oil in December. Daily runs were 0.2% (25,000 bpd) higher than November’s 10.125 million bpd, which topped the 10 million bpd mark for the first time.
The statistics bureau said that for the whole of 2012, crude runs expanded by 3.7% at 467.91 million tons, or 9.36 million bpd, compared with 4.9% growth for 2011.
According to Reuters, new refining capacity is expected to increase by some 600,000 bpd in 2013. Beijing’s decision to revamp its fuel-pricing scheme is also expected to bolster refinery throughput. “With inflationary expectations largely benign at the moment, the policymakers may have an incentive to make fuel prices more flexible and react to crude prices more quickly, which could protect steady margins by the refiners and encourage runs,” said Cheng Sijin, Barclays’ Singapore-based commodity analyst.
The country’s net imports of refined fuel rose by 4.3% to 297,800 bpd in 2012, while net fuel imports fell by 8.4% to 370,300 bpd in December.
Analysts expect China to stockpile crude in 2013, when more oil storage tanks will be ready. Although stockpiles do not directly contribute to implied oil demand, filling the tanks would boost crude imports. (January 18, 2013)