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China Oil Demand in July 2013

Source: OPEC 7/28/2013, Location: Asia

Lower gasoil demand growth figures in China — along with softening economic indicators — have raised concern in the industry, promoting downward revision by major forecasters. The data for gasoil, the major product in the country, has continued to disappoint. The product has seen negative growth since late March 2013, compared with 2012. The product declined by 3.8% and 2.8% over April and May 2012, respectively. Cold and wet weather conditions, delayed agricultural activities in the country, as well as major economic fears have had their toll on product demand levels.

The Chinese official manufacturing purchasing managers’ index (PMI) stayed above the 50 threshold in April, which indicates expansion, but showed a contraction in Chinese manufacturing activities for the first time this year in May 2013. The indicator stood at 49.19 that month, confirming current weakness in the Chinese economy. Consequently, oil demand figures in China have been revised down by 21 tb/d to stand at growth levels of 0.33 mb/d for 2013.

Positively, gasoline consumption in the country continued to grow at a higher rate. The product grew by 0.2 mb/d or 11% over last year’s levels for the month of May. Growth is also noteworthy on a cumulative basis, increasing by around 0.3 mb/d or 14% over the same period last year. This increase is very much supported by passenger car sales in the country, which continue to soar in the face of economic worries. The latest data for car sales in China show figures of around 12% in June y-o-y. It’s worth mentioning that diesel and gasoline account for more than 50% of the country’s oil demand.

Chinese oil consumption grew in 2012 by 0.3 mb/d. For 2013 and 2014, Chinese oil consumption is projected to increase by a similar amount, which is within the country’s historical average growth level for the past six years. This growth is subject to economic performance, the oil product pricing mechanism, changes in fuel qualities/standards and the level of fuel substitutions factors which need to be closely monitored.

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