China’s demand and throughput of oil will pick up in the second-half of the year as the government growth incentives take hold, according to a recently released Platts analysis.
“The government will be eager to boost economic growth by the time the decennial political leadership transition occurs in the fourth quarter,” explained Ms Song. “We could see oil demand rebounding at the end of the year, which on balance should put growth at 3% to 4% for the full year.”
China’s apparent oil demand rose 2.4% year on year in July to 38.92 million metric tons (mt), or an average 9.2 million barrels per day (b/d). This is a rebound from June’s first monthly contraction in more than three years.
In June, demand fell 1.9% year on year to 9 million b/d, as China’s struggling economy was hit by poor exports and slowing manufacturing activity. Platts says July’s gain is largely due to the 810,377 b/d rise in oil product imports to 3.09 million mt, which boosted net imports of oil products 53% or 346,181 b/d from June to 1.32 million mt. Net product imports are up 65% from July a year ago.
However, the market research company believes that refinery runs and crude imports in July a less than robust fundamental demand growth. Two consecutive retail oil product price cuts in June and July have pressured refining margins and likely kept state refiners running at minimum levels.
July’s refinery runs were 37.6 million mt, or 8.89 million b/d, marking a 1.1% year on year. But July’s runs were still the second lowest so far this year, surpassing June levels by 100,000 b/d.
Crude oil imports in China also showed a slowing from the first half of the year, although still managing double-digit growth compared to last year. The country’s total crude oil imports in July rose 12.4% year on year to 21.83 million mt, or 5.16 million b/d. In June, China imported 21.72 million mt of crude oil, or 5.31 million b/d.
But July’s daily import average was the lowest since October 2011, according to China Customs’ data, and compares with 5.69 million b/d in the first quarter and 5.59 million b/d in the second.
Gasoil, which makes up the largest component of China’s oil product mix, exposed July’s underlying weakness. “Gasoil has been the laggard so far, with apparent demand contracting two months in a row due to the slowdown in industrial activity,” said Song Yen Ling, Platts Senior Writer for China.
Apparent demand for gasoil in July fell 1.3% year on year to 13.74 million mt, or 3.32 million b/d. In June, demand fell 2.8% year on year to 13.37 million mt, reflecting the weakening industrial sector.
Platts calculates China’s apparent or implied oil demand on the basis of crude throughput volumes at the domestic refineries and net oil product imports, as reported by the National Bureau of Statistics (NBS) and China Customs. Similar to overall apparent demand for oil, apparent demand for products is calculated by adding domestic output from refineries to net imports.