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China Oil Demand in February 2013

Source: OPEC 2/25/2013, Location: Asia

Apparent Chinese oil demand in December 2012 grew strongly by almost 6% y-o-y, the largest monthly growth during 2012, to stand at 10.5 mb/d. Part of this increase was due to the stronger economic growth of 7.8% in the 4Q. This has boosted demand of raw materials as well as consumption of fuel oil.

At the same time, higher refinery throughput, which rose by 8.4% in December, also contributed to increasing apparent demand in China. Gasoline consumption rose by almost 17% y-o-y as a result of growing mileage and new vehicle registrations. Moreover, strong industrial production in December 2012 pushed the consumption of fuel oil up. Gasoil consumption during December 2012 was weak due to cold weather limiting construction and agricultural activity with the situation worsening in January, the coldest winter for the last 30 years. Overall, demand in China in 2012 averaged 9.7 mb/d, an increase of 0.33 mb/d, compared to the previous year.

Looking ahead, the country is facing a severe challenge from pollution, especially in its big cities, resulting from traffic congestion. In some cities like Beijing, the government already restricts private vehicle owners from using their cars at least one day every week. Also, the government plans to increase fuel quality and inspection standards for cars. Other measures include capping car sales and restricting the issuance of license plates. Such measures would imply higher fuel prices and, in general, less consumption of transportation fuel in the short-term future. Extensive coal use for heat generation could also reduce oil consumption needs in China. In contrast, the solid economic recovery and new leaders looking to promote growth, as well the addition of new refinery capacity, will call for more use of oil this year. Indeed, Chinese oil demand in 2013 is expected to grow by 0.37 mb/d, slightly more than in 2012, averaging 10.1 mb/d.

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