China oil demand sluggish

Mar 08, 2014 12:00 AM

Sluggish growth in the Chinese industrial sector continued to take its toll on the country’s oil use, with the latest estimate putting Chinese apparent demand down at around 10.4 mb/d in December, a contraction of around 1.8% on the year earlier.

Gasoil/diesel led the decline, reflecting the recent dip seen in closely-tracked manufacturing-sentiment indicators (such as HSBC/Markit’s which flipped back into ‘contracting’ territory at the turn of the year) and reports of ailing heavy transport demand, as the country has made a concerted effort to move less coal across the country.

For 2013 as a whole, Chinese oil demand is now estimated at around 10.1 mb/d, just 280 kb/d (or 2.8%) above 2012.

Although the IMF, in its updated GDP projections of last month, raised its forecast of Chinese economic growth for 2014 to 7.5%, from 7.3% previously, the forecast of Chinese oil demand growth has been marginally reduced on last month’s Report.

The curbed Chinese demand numbers are attributable to a combination of recent weaknesses in the data and expectations of greater energy efficiency, a long-established policy goal of the Chinese administration that seems to be gaining traction recently.

Following a near doubling of net diesel exports in 2013, as gasoil demand has struggled, further gains in diesel exports are foreseen in 2014 with both Sinopec and PetroChina reportedly gaining large export licenses for 1Q14.

SOURCE: International Energy Ageny, Oil Market Report, February 2014

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