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China Oil Demand in February 2015

Source: OPEC 2/19/2015, Location: Asia

In December 2014, Chinese oil demand continued its high pace of growth, increasing by 0.66 mb/d or more than 5% y-o-y. 2014 average growth for China stands at around 0.39 mb/d or nearly 4%. In December, oil demand growth was determined by rising gasoline, LPG and diesel requirements while fuel oil consumption decreased. Gasoline demand moved in line with rising car sales in December. According to statistics and analysis from the China Association of Automobile Manufacturers (CAAM), Chinese automobile sales were 16% higher y-o-y. 2014 also highlighted significant increases in car sales with total units sold reaching 23 million units, up by 7% y-o-y compared with the 14% growth rate of 2013. In December, gasoline consumption grew by more than 0.30 mb/d or 13% compared with the same month a year earlier, yet this growth was capped by an increase in consumption taxes as Chinese authorities continued to raise tax levels as a means of limiting air pollution.

Additionally, the increase in LPG requirements can be attributed to the country’s expanding petrochemical industry as LPG grew by more than 0.27 mb/d or 27% y-o-y. Diesel oil also increased by around 0.25 mb/d or more than 7% y-o-y, continuing its good performance in 4Q14. The pickup in diesel requirements was mainly due to improvements in weather conditions as well as the implementation of new very sizeable construction projects focused on the transportation sector.

Fuel oil increased in December by more than 26% y-o-y, a result of the higher utilization rate by teapot refineries, which are major consumers of fuel oil in China. Fuel oil demand growth was lower in 2014 by more than 12% y-o-y, the first decline after three years of growth.

The 2015 outlook is relatively in line with last month’s MOMR with equal upward potential/downward risks; the downside risks are focused on the likelihood of slower economic activities as well as the implementation of transportation fuel consumption measures geared towards curbing demand. The solid petrochemical sector and expansions in refining capacity, on the other hand, could be considered as elements supporting upward potential to 2015 oil demand estimates. For 2014, Chinese oil demand is anticipated to grow by 0.39 mb/d, while oil demand in 2015 is projected to increase by 0.31 mb/d.

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