Preliminary data showed steady growth in oil consumption of around 0.5 mb/d in March compared with the same quarter one year earlier, despite the easing pace of the economy overall. The bulk of this growth came from expanding transportation and petrochemical sectors, which affected fuel consumption.
Jet fuel demand surged during the month, rising by around 0.12 mb/d, more than 24% y-o-y. This significant rise is mainly a result of greater air travel during the Lunar New Year holidays. According to the Civil Aviation Administration of China, airliners operated around 360,000 flights during Lunar New Year festivals, representing a more than 9% increase compared with the holiday season one year ago.
Gasoline also increased, with growth rising by more than 0.19 mb/d compared with the same period in 2014. This was consistent with sales of passenger cars in March, which enjoyed year-on-year growth of 9%, indicating healthy demand, according to the China Association of Automobile Manufacturers. For the first three months of 2015, sales of passenger cars reached 5.3 million units, 9% higher than the previous year. SUV purchases continued to enjoy high-speed growth; sales were up by nearly 50% compared with the previous year. MPVs also enjoyed positive growth, with an increase of 19%.
In the petrochemicals sector, where LPG – specifically propane – is widely used, consumption rose by around 12% in March compared with the same month in 2014, implying healthy demand. On the other hand, the slowing economy kept consumption of diesel rather flat. Consumption of fuel oil was again dropping, as initial data seem to suggest a decrease in growth of around 35 tb/d y-o-y. Slower industrial activity seemed to be the largest contributor to this slow down.
Going forward, the consumption outlook in China for the remainder of 2015 is expected to be balanced. Downside risks are linked to slower economic activity as well as a speed up in policies encouraging a reduction in transportation fuels. On the other hand, expansion in the petrochemical sector – especially in propane-dehydration (PDH) plants and the refinery sector – provide an upside potential for Chinese oil demand growth. For 2014, the country’s oil demand grew by 0.40 mb/d, while oil demand in 2015 is projected to increase by 0.31 mb/d.