China's apparent oil demand growth in May improved only a little from April's lackluster figure, edging up 0.5% year on year to 39.72 million mt, or an average 9.39 million b/d, according to Platts analysis of recent data released by the government. Overall apparent demand in May was the second lowest so far this year after April, when demand rose 0.3% on year to 38.32 million mt (9.36 million b/d). China does not release official data on oil  demand or commercial and strategic oil inventories. Platts calculates the country's apparent oil demand based on official data on refiners' crude throughput and net oil product imports.
Weak refinery runs continued in May from April as refiners were still in maintenance season. Processing rates contracted by 0.7% year on year to 38.33 million mt, according to data from the National Bureau of Statistics released June 9.
However crude oil imports surged over 18% on year to a record 25.48 million mt, breaching the 6 million b/d mark to 6.02 million b/d, according to customs data. Analysts have attributed the strong imports to stockpiling, both in the strategic petroleum reserve and in commercial storage.
Net crude oil imports in May were 25.30 million mt, up 17.7% year on year from the 21.5 million mt in May 2011. They were also significantly higher than April's net crude imports of 22.21 million mt.
Oil products imports rose 2.4% year on year to 3.47 million mt, while oil product exports fell over 15% to 2.1 million mt, bringing net imports to 1.39 million mt, up nearly 50% year on year.
In the first five months of this year, China's apparent oil demand rose 2.6% to 200.42 million mt (9.66 million b/d). Refinery runs rose 2.2% on year during the period to 192.94 million mt, according to NBS data. Net oil product imports rose over 14% on year to 7.48 million mt.
UNCERTAINTY OVER FUEL PRICE REFORM
Meanwhile, the relatively weak oil demand growth makes any fuel price reform uncertain, Sonia Song at Nomura Securities said on Monday.
"Contrary to the market's high hopes for fuel pricing reform in China, we believe pricing reform will be put on the back burner until China's oil demand growth normalizes."
The bank estimates China's oil demand grew by 2.1% from January to May this year, in line with growth recorded during "historical crisis times" such as the Sars period in 2003 and the global financial crisis in 2008, when the Chinese government kept fuel prices low. This compares with a 10-year average of 7-8% demand growth.
Analysts at Bernstein Research said Thursday in a report that while China's economy is slowing, they do not expect anything "catastrophic."
Instead, the bank expects aggregate incremental demand over the next five years to average 2.8 million b/d, higher than the past five years.
"China's oil demand will increase at average 5.5% a year between now and 2016 to 12.5 million b/d," the report said.
Recent liquidity easing measures by the government could allay fears of an economic slowdown in China.
These include a 25 basis point interest rate cut by the People's Bank of China, approvals for new infrastructure projects and easing of bank reserve requirements.
President Hu Jintao said this week that the government would ensure China's economy is driven by consumption, investment and exports in order to ensure steady and robust growth and maintain social harmony and stability.
"In our view, this is a positive development to help expedite the policy responses to the current growth slowdown," Morgan Stanley said in a report Tuesday. It pointed out that compared with the repeated emphasis on promoting consumption-driven growth previously, Hu's comments mark a shift to support policy measures to boost growth from all three engines.
Source: Platts