Market Overview China: Oil Demand Analysis
China's apparent oil demand in May dipped 0.7% compared with the same month last year to 39.92 million metric tons (mt) or an average 9.44 million barrels per day (b/d).
Apparent oil demand last month was at its lowest level in nine months – recording the first year-on-year contraction since January – following three months of relatively slow growth.
On a month-over-month basis, apparent oil demand in May fell 3.2% from April, reflecting China’s underlying damped economic performance. This was the third consecutive year that apparent oil demand contracted in May from April.
This was counter to prior years, when apparent oil demand traditionally accelerated in the second quarter compared with March due to a pick-up in industrial activity in spring.
China’s refinery crude oil throughput volumes in May rose 3.5% from a year earlier to a four-month low of 9.54 million b/d, according to the latest data from China’s National Bureau of Statistics.
Net crude imports for May were up 9.4% from the same period a year ago to 6.17 million b/d. However, China became a net exporter of oil products last month, with exports outpacing imports by 410,000 mt compared with net oil product imports of 1.25 million mt in May 2013.
China has significantly reduced its imports of jet/kerosene and fuel oil this year due to a combination of sluggish demand and increased domestic output. Exports of gasoline and gasoil have remained steady from a year ago.
China was a net oil products exporter in March, the first time since January 2010, but returned to being a net importer in April.
“We have seen a distinct fall in China’s net oil product imports in the last year,” said Song Yen Ling, Platts senior writer for China. “This is mainly because domestic demand growth has slowed while refiners’ output has grown the result of expanded refining capacity planned before the current slowdown.”
Over the first five months of the year, China’s apparent oil demand was essentially flat, rising a mere 0.2% from the same period of 2013 to 9.85 million b/d.
In China’s individual oil products markets, gasoil apparent demand in May flipped to negative growth, contracting by 1.6% year over year to 3.33 million b/d. Domestic production dipped 0.7% year over year to 14.15 million mt. Net exports surged 66.7% from a year earlier to 300,000 mt. Gasoil demand in China has slowed as the nation’s economic growth has slowed.
Gasoline apparent demand increased 10.3% last month from a year earlier to 2.36 million b/d, on strong transport sector consumption. Domestic refiners’ gasoline output increased 7.9% on a year-over-year basis to 8.86 million mt, while net exports fell some 38.1% year over year to a 17-month low of 260,000 mt.
Fuel oil apparent demand last month plummeted 33.6% from a year ago to 512,000 b/d on the back of a 73.5% slump in net imports to 400,000 mt. Domestic production of fuel oil in May was down 6.9% to 2.1 million mt.
Consumption of imported fuel oil—used significantly as a raw material for the manufacturing of refined petroleum products by small, independent refiners known as “teapot” refineries—has taken a hit the past two years as the refiners have gained greater access to domestic crude oil, which is an alternate feedstock.