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2018-05-04 15:25:00

CHINA'S OIL DEMAND UP 6.8%

CHINA'S OIL DEMAND UP 6.8%

PLATTS- China ended the first quarter of 2018 with robust apparent oil demand growth of 6.8% year on year, as stronger-than-expected GDP growth boosted consumption from the industrial and construction sectors and outweighed concerns over rising oil prices, S&P Global Platts calculations based on latest official data showed.

The apparent oil demand growth number for Q1 not only reflected a recovery in demand in China, but it also sent a signal that the rally in crude oil prices -- Brent crude has risen nearly 11% in 2018 -- has so far failed to make a dent on demand in Asia's biggest energy consumer.

The 6.8% year-on-year GDP growth aided China's overall oil demand to rise to 12.36 million b/d in Q1, much higher than the 4.1% growth seen in Q1 of 2017. For the whole of 2017, demand growth was at 5.5% year on year.

Sources and analysts said apparent oil demand in April could maintain the same momentum amid expectations that consumption would have fully recovered from a couple of lean phases for demand witnessed during Q1 -- the Lunar New Year holidays in February, as well as key annual political events in March.

China's 6.8% GDP growth in Q1 was higher than the target of 6.5% for the whole of 2018. The country's industrial, construction and logistics sectors grew at 6.5%, 5.4% and 7.7%, respectively, National Bureau of Statistics data showed.

Jet fuel posted the sharpest growth among all oil products in Q1, rising nearly 12% year on year on the back of strong demand for air travel.

Oil demand also found support from strong demand for LPG, which rose 8.7% year on year. Market sources said LPG consumption witnessed a rise -- both from residential users looking for cooking fuel, as well as from petrochemical plants looking for feedstock.

Gasoline demand posted modest growth of 2.8% year on year in Q1, while gasoil demand posted negative growth in that period.

China does not release official data on oil demand and stocks. Platts calculates the apparent or implied oil demand by taking into account official data on monthly crude throughput at refineries and net product imports.

THROUGHPUT, GASOLINE GROWTH

China's overall crude oil imports inched up 0.6% year on year to 39.17 million mt in March, 3.6% lower than the record high of 40.64 million mt in January. Over the first three months of the year, China's crude imports rose 7% on the year to 112.08 million mt, data released by the General Administration of Customs late April showed.

China's refinery throughput rose 7.6% year on year in Q1 to 12.11 million b/d, while net oil product imports during Q1 averaged 244,000 b/d, down 21.5% year on year, according to General Administration of Customs data.

China's gross oil product exports jumped 19.3% year on year in Q1, but are expected to fall in April because of tighter export quota availability.

In March alone, China's apparent demand for oil products rose 5.2% year on year to an average of 12.94 million b/d. Refinery run rates rose 8.1% in the same month to 13.08 million b/d due to a relatively lower level of scheduled maintenance.

Gasoline demand in Q1 grew only by 2.8% year on year to 2.96 million b/d. Growth in the three-month period was pulled down by negative demand growth of 2.8% witnessed in March, Platts calculations showed.

S&P Global Platts Analytics expects gasoline demand to have recovered in April from March, because more road travel was expected during the spring season, especially during the national Tomb-Sweeping Day holidays over April 5-7.

Blended barrels are not included in gasoline apparent demand calculations because of the absence of official data. But imports of mixed aromatics, which are used mainly as blending material for gasoline, provide an indication of demand. China's imports of mixed aromatics fell 32% on the year to 1.98 million mt in Q1, according to customs data.

LPG, JET FUEL SHINE

Apparent demand for LPG jumped 10.1% year on year in March, which helped to push up consumption growth in the three-month period by 8.7% year on year to 1.79 million b/d.

LPG demand from PDH plants surged as processing margins rose from as low as Yuan 800/mt ($127.19/mt) in Q4 2017 to around Yuan 1,900/mt in Q1 2018, according to Platts calculations.

Chinese PDH plants' operation rates averaged 83% in March, up from 71% in February and 65% in January, according to Platts calculations based on data from local information provider JLC.

In April, LPG demand is estimated to remain strong, trade sources said.

Naphtha demand grew 4.6% year on year in Q1 to 1.08 million b/d, led by strong demand from petrochemical plants and new reformer units.

Apparent demand for jet fuel rose 11.9% year on year in Q1 to 887,000 b/d as demand for air travel rose during the Lunar New Year holidays.

Sinopec and PetroChina said in their Q1 financial reports that they had lifted jet fuel production because of strong demand and high margins. As a result, China's jet fuel output jumped 10.9% year on year in January-March to 1.01 million b/d, National Bureau of Statistics data showed.

Looking ahead to April, jet fuel demand is likely to slow marginally from the Q1 level due to fewer public holidays.

Gasoil apparent demand, on the other hand, bucked the trend and edged down 0.4% year on year to 3.36 million b/d in January-March.

"Normally, industrial activity recovers in March and boosts gasoil consumption. But I did not see that happening last month," a Sinopec refiner in Shandong said.

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Tags: CHINA, OIL, DEMAND