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China oil demand growth slows

27 Oct 2011

China’s implied oil demand grew at 1 per cent on the year in September to about 8.9 million barrels per day (mbpd), the lowest this year, Reuters calculations based on preliminary government data show. 

The data shows a continuing trend of slowing oil demand since June from the double-digit growth since late last year as Chinese economic growth slows and tightening credit cuts into fuel spending by small industries. 

Slowing demand growth in the world’s second largest oil consumer, which contributed more than half of global incremental oil use this year, will worry oil markets, although analysts said real oil use may not be as bearish as the figures show. 

Oil firms have drawn on inventories for the three months to August, to ease the pain of negative refining margins, while a 2 per cent upward revision to September 2010 crude throughput contributed to the slow year on year number.  

“We had expected a stronger rebound in refinery runs as plants returned from maintenance and given new capacity expansion,” said a Beijing-based oil analyst. 

“However, September industrial production grew 13.8 per cent year on year, stronger than August, suggesting end-user demand remained solid,” he said, adding that slowing refinery production and solid end-user demand imply fuel stocks should decline further. 

Implied oil demand is calculated using China’s refinery crude throughput plus net imports of refined fuel but excluding changes in fuel inventories, which China rarely publishes. 

The National Statistical Bureau revised up crude throughput in September last year by nearly 2 per cent, or about 160,000 bpd. 

Inventories of refined oil products in China at end-August fell 1.1 per cent versus July, declining for the third month in a row, suggesting fuel inventories might have fallen to about 16.9 million tonnes at the end of August, according to Reuters calculation based on data from the Xinhua Oil, Gas and Petrochemicals publication.