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China Oil Demand in September 2012

Source: OPEC 10/2/2012, Location: Asia

In China, July imports were very weak; hence, the country’s oil demand for the month was not as strong as expected. The third quarter is China’s high season for oil consumption summer is the season for agriculture as well as the driving season and under normal circumstances, this results in a stiff oil demand hike during these months. This year’s weak oil demand came about despite the government’s decision to cut retail gasoline and diesel prices by more than 4% in July. Despite the curb in new car registrations in major cities, the country’s gasoline consumption rose by 12% in July y-o-y. It is expected that the trend will not only last until year-end but also throughout 2013. China’s gasoline use will hit the 2.0 mb/d level soon. Year-to-date gasoline growth is estimated at 10% y-o-y versus growth of only 1% of diesel demand. The strong gasoline growth was supported by the summer season and relatively moderate retail prices. Almost 35% of China’s oil consumption is in a form of diesel.

Diesel is used by almost all economic sectors within the economy and the amount used has been in the growing mode for a few years. Surprisingly enough, the country’s use of diesel has been on the decline since the start of this year; however, this is not expected to be the trend in the near future. China’s oil demand grew by only 0.2 mb/d in July y-o-y. China’s oil demand in the third quarter is expected to grow by 0.3 mb/d y-o-y.

China is embarking on a new energy front in order to strengthen its grip on energy consumption levels via its newly introduced energy transformation plan. The country’s aim is to be efficient in energy and to equally distribute energy to all regions of the nation. Data from China Association of Automobile Manufacturers (CAAM) shows that China's automobile sales grew by 8.2% in July, y-o-y, while overall sales for the first seven months in 2012 grew by a mere 3.6%. A number of factors still impose a strong downside risk to the development of the Chinese auto market during 2012 and 2013, such as the end of tax incentives for small cars, the new government rules to curb sales of cars within city limits and a slowdown in the economy. Due to the fact that Beijing, Shanghai and the southern cities of Guangzhou and Guiyang have imposed restrictions on car ownership to curb traffic, some drivers in other cities have rushed to buy before they face limitations in their cities.

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