China’s oil demand continued its increasing trend with January 2014 growth of around 3% y-o-y. This was largely determined by rising gasoline, LPG, jet fuel and naphtha requirements. Gasoline demand moved in line with rising car sales during January and accounts for the largest share growth in the country. Gasoline demand growth could, however, be declining in the future as a result of restrictions on car sales imposed by a number of big Chinese cities and higher fuel quality standards, both measures part of efforts to reduce emissions. Both LPG and naphtha requirements can be attributed to the country’s expanding petrochemical industry, a trend which is projected to continue in the future as substantial increases in ethylene capacity are expected to go onstream during 2014.
Moreover, there are already significant substitutions of feedstock from naphtha towards cheaper LPG. These substitutions are expected to continue in the near future.
Moreover, the healthy aviation sector has called for more jet fuel demand, while gas diesel oil and fuel oil in the industrial sector are being increasingly substituted with natural gas and coal. The overall outlooks for 2014 remain relatively unchanged since last month with the same factors pointing to downside risks, such as a possible economic slowdown and implementation of measures in order to curb transportation fuels demand. In contrast, the flourishing petrochemical sector in the country and expansions in refining capacity could be considered as the principal factors that could push current 2014 oil demand projections up. For 2013 Chinese oil demand grew 0.33 mb/d, while it is projected to increase again by 0.34 mb/d in 2014.