CHINA REDUCED DEMAND
China's apparent oil demand in February contracted 1% year over year to 40.7 million metric tons (mt), or an average 10.66 million barrels per day (b/d), according to a just-released Platts analysis of Chinese government data.
Despite the contraction, this was the second-highest monthly volume on record. Following government revisions to year-ago data, China's apparent oil demand in February 2014 was adjusted to an average 10.76 million b/d – the record high volume.
Apparent oil demand in February this year increased 4.3% from January's average of 10.22 million b/d.
China's refinery throughput in February averaged 10.39 million b/d, falling 2.5% from a year earlier but expanded 2.4% month over month, data from the country's National Bureau of Statistics showed March 13.
Figures from the General Administration of Customs released March 8 showed oil products imports for February jumped 11.2% to 2.68 million mt, while oil product exports slumped 16.8% to 1.68 million mt, reflecting some inventory build by state-owned refiners. This resulted in net oil product imports of 1 million mt in February.
Over January to February, China's total apparent oil demand rose 2.6% to average 10.43 million b/d. This is the highest rate of growth over the two-month period since the 5.7% recorded in 2012, this is in contrast to the 0.6% contraction seen over the same period last year.
"While there appears to be some recovery, apparent demand is often strong during the first two months of the year," said Platts senior writer for China, Song Yen Ling. "This could partly be attributed to significant stockbuild in oil products by refiners."
Apparent demand for gasoil – the most widely consumed oil product in China – slumped 5.6% year over year in February to 13.28 million mt, a reflection of subdued industrial demand during the Lunar New Year that was on February 19 this year. Up to 70% of the fuel is used in the transport sector while the remainder is used by various sectors, including construction, farming and fishing, industrial heating and to power machinery.
Apparent demand for gasoil rose 2.3% over the first two months of this year to 28.12 million mt, the first time there was positive growth over the same period since 2012. However, actual consumption was likely lower than this level as significant stocks – close to 3 million mt – were likely added to storage over the two months, according to Platts' estimates. Chinese refiners typically start building inventories in preparation for Lunar New Year holidays.
Meanwhile, apparent demand for gasoline in February edged up 1.9% year over year to 8.76 million mt. Higher travel during the festive season also saw a growth of 8.2% from January to February to 18.13 million mt. In addition, Chinese passenger vehicle sales rose 8.7% to 3.43 million units in the first two months of the year, according to the China Association of Automobile Manufacturers.
Fuel oil witnessed a further decline in demand following consumption tax increases in the fourth quarter of last year, which has made the fuel more expensive for the country's independent teapot refiners to buy. The refiners use fuel oil as an alternative feedstock in the absence of crude import rights.
Apparent demand for fuel oil in February slumped 17.6% year over year to 2.59 million mt, with year-to-date volumes falling 21.5% to 5.13 million mt. Net imports of the fuel over January-February were at their lowest since 2010, at 1.38 million mt.
Month-to-month demand in China is generally viewed to be subjected to short-term anomalies which are of interest and important to note, but often fail to reveal the country's underlying demand trends. Year-to-year comparisons are viewed by the marketplace to be more indicative of the country's energy profile.
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