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China Oil Demand in March 2013

Source: OPEC 3/20/2013, Location: Asia

January was another strong month for China’s apparent oil consumption. This grew sharply by almost 7% y-o-y, the largest monthly growth since the beginning of 2012 and overcoming the solid December 2012 figures. Gasoline consumption increased by a solid 12% y-o-y, as a result of increased new vehicle registrations — according to figures from the China Association of Automobile Manufacturers, automobile sales growth peaked at 46%, compared with January 2012. Diesel usage in road transportation and industrial production was another factor behind the substantial growth in the month, while colder weather limited somewhat construction and agricultural activity.

The short-term outlook for China’s oil consumption faces more downside than upside risks, as the National Development and Reform Commission has already incorporated rises in the retail price ceiling for gasoline and diesel, effective from 25 February 2013, as a reaction to increasing global oil prices. The gasoline price rose by 300 yuan and diesel by 290 yuan per tonne, translating into hikes of 3.5% and 3.8% at the pump respectively. According to the current practice, fuel prices can be raised if a weighted 22-day moving average price for a basket of crudes — Brent, Dubai and Cinta — rises above 4% from the previous adjustment. In addition, ongoing plans for increasing fuel quality, restricting the insurance of car licence plates and increasing the number of vehicles operating with natural gas are factors that could push down Chinese oil consumption in 2013.

During 2012, there were around 1.5 million vehicles operating with natural gas in China, an increase of 48% from 2011. The vehicles are mostly taxis, buses and trucks and run on both compressed natural gas and liquefied natural gas. China’s oil demand in 2013 is expected to grow by 0.37 mb/d to 10.1 mb/d, unchanged from the previous report, and slightly more than in 2012.

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