China's Nov oil demand flat, revival hopes fade
BEIJING, Dec 26 (Reuters) - China's implied oil demand nudged up a minimal 0.1 percent in November from a year earlier, quashing hopes of a year-end rvival in the sluggish demand growth of the world's second largest consumer.
Imports of crude oil slid to the second-lowest level since January and exports of heavier products rose, as the impact of measures designed to keep fuel in China appeared to fade.
The growth rate from a year earlier was undermined by a high baseline the previous November, however, and implied demand -- net imports plus refinery output, but excluding inventory changes that are not reported -- actually rose from October.
China used 6.42 million barrels per day (bpd) last month, compared with 6.27 million bpd in October, Reuters calculations from official trade and output data showed.
Implied demand had jumped year-on-year in September and rose firmly in October, heightening expectations of a recovery. Some analysts had expected that as winter deepened, heating needs would drive demand growth, but November data dampened that hope.
Although refineries ran near record levels, they posted the weakest growth in output since February as they neared maximum capacity, and apparently drew down crude stocks, while net imports also slipped from both October and 2004 levels.
Chinese demand has been hard to predict -- unnerving traders with a 15 percent leap last year before collapsing back to barely one fifth of that in 2005 -- in part because of its reluctance to reveal how much oil its companies have stockpiled.
For the first 11 months China's implied demand rose a subdued 3.3 percent, roughly in line with IEA forecasts for a 3.1 percent expansion through 2005, although far below predictions as high as 7.9 percent it made earlier this year. The International Energy Agency (IEA) expects a slight pick-up to 6.0 percent next year.
The Organization of the Petroleum Exporting Countries last week held its first talks with Beijing, seeking information about demand and inventories in a country the cartel said had changed the culture of world oil markets by reducing seasonal swings in consumption.
EXPORT CURBS CONTINUE
Many analysts were more optimistic about the outlook for 2006, with growth forecasts of 6 percent or more, but warned that government pricing policies could stifle consumption, as they did earlier this year in Guangdong.
"Chinese demand in 2006 will be set by the choices that Chinese authorities make in fixing the ceilings for retail prices," SG Commodities said in a recent research note.
Beijing sets tight caps on pump prices and for most of this year they have languished well below global markets, so refiners selling into the domestic market often have to swallow a loss.
They responded by cutting supplies at home and boosting more profitable exports, which created shortages across the southeast, turned highways into parking lots and unnerved officials.
Worried about the dry pumps, but also nervous about the political and inflationary risks of pricier fuel, they drew up a slate of export curbs and import incentives that aimed to secure fuel through policy instead of free market mechanisms.
Industry officials have said the curbs will continue next year, with quarterly oil product export quotas -- Beijing's toughest control on fuel shipments for years -- due to be introduced as a flexible extension of measures that required refiners to seek government approval on a monthly basis for gasoline or diesel export sales.
China itself has forecast demand will increase 6 percent next year, but even if the measures -- which helped cut exports of gasoline by around half -- do not stifle growth, the IEA warned that an overall pick-up could hide sliding demand for fuel oil.
"There is evidence that power-sector imbalances are being resolved faster than expected, and thus the demand for fuel oil in power should continue its decline," the IEA report said.
A smaller-than-expected electricity shortfall this summer cut into demand for diesel to fuel individual generators and fuel oil for the plants that provide up to a quarter of Guangdong's power.
(Additional reporting by Judy Hua)
Imports of crude oil slid to the second-lowest level since January and exports of heavier products rose, as the impact of measures designed to keep fuel in China appeared to fade.
The growth rate from a year earlier was undermined by a high baseline the previous November, however, and implied demand -- net imports plus refinery output, but excluding inventory changes that are not reported -- actually rose from October.
China used 6.42 million barrels per day (bpd) last month, compared with 6.27 million bpd in October, Reuters calculations from official trade and output data showed.
Implied demand had jumped year-on-year in September and rose firmly in October, heightening expectations of a recovery. Some analysts had expected that as winter deepened, heating needs would drive demand growth, but November data dampened that hope.
Although refineries ran near record levels, they posted the weakest growth in output since February as they neared maximum capacity, and apparently drew down crude stocks, while net imports also slipped from both October and 2004 levels.
Chinese demand has been hard to predict -- unnerving traders with a 15 percent leap last year before collapsing back to barely one fifth of that in 2005 -- in part because of its reluctance to reveal how much oil its companies have stockpiled.
For the first 11 months China's implied demand rose a subdued 3.3 percent, roughly in line with IEA forecasts for a 3.1 percent expansion through 2005, although far below predictions as high as 7.9 percent it made earlier this year. The International Energy Agency (IEA) expects a slight pick-up to 6.0 percent next year.
The Organization of the Petroleum Exporting Countries last week held its first talks with Beijing, seeking information about demand and inventories in a country the cartel said had changed the culture of world oil markets by reducing seasonal swings in consumption.
EXPORT CURBS CONTINUE
Many analysts were more optimistic about the outlook for 2006, with growth forecasts of 6 percent or more, but warned that government pricing policies could stifle consumption, as they did earlier this year in Guangdong.
"Chinese demand in 2006 will be set by the choices that Chinese authorities make in fixing the ceilings for retail prices," SG Commodities said in a recent research note.
Beijing sets tight caps on pump prices and for most of this year they have languished well below global markets, so refiners selling into the domestic market often have to swallow a loss.
They responded by cutting supplies at home and boosting more profitable exports, which created shortages across the southeast, turned highways into parking lots and unnerved officials.
Worried about the dry pumps, but also nervous about the political and inflationary risks of pricier fuel, they drew up a slate of export curbs and import incentives that aimed to secure fuel through policy instead of free market mechanisms.
Industry officials have said the curbs will continue next year, with quarterly oil product export quotas -- Beijing's toughest control on fuel shipments for years -- due to be introduced as a flexible extension of measures that required refiners to seek government approval on a monthly basis for gasoline or diesel export sales.
China itself has forecast demand will increase 6 percent next year, but even if the measures -- which helped cut exports of gasoline by around half -- do not stifle growth, the IEA warned that an overall pick-up could hide sliding demand for fuel oil.
"There is evidence that power-sector imbalances are being resolved faster than expected, and thus the demand for fuel oil in power should continue its decline," the IEA report said.
A smaller-than-expected electricity shortfall this summer cut into demand for diesel to fuel individual generators and fuel oil for the plants that provide up to a quarter of Guangdong's power.
(Additional reporting by Judy Hua)
posted by Marko at 12/26/2005 10:11:00 AM
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