The detailed Chinese oil data for October were reported yesterday. Calculated demand adjusted for inventory changes came in at 9.5 million b/d. This was meaningfully weaker than demand in September which was calculated at a record 9.76 million b/d. Chinese oil demand has hovered close to the 9.5 million b/d level since March. If you want to make a bullish twist to that number you would use worlds like “Chinese oil demand continue close   to record high levels”, or “Chinese oil demand surpassed 9.5 million b/d for only the 5th time in history”. The reality is however that it is the growth numbers we are mainly interested in when it comes to China. After all we are talking about the country that has been behind 0.5 million b/d of the 0.8 million b/d average global oil demand growth for the latest 5 years. So what are the growth numbers looking like?
•Well; Chinese oil demand grew 260 kbd year on year in October. Year to date oil demand growth is a weak (to be China) 220 kbd. This is far from the strong growth numbers we have seen for most of the last decade. Gasoline demand growth continues at strong levels and is up 153 kbd year to date and jet demand is also growing decent at 34 kbd year to date. Both these oil products are connected to personal consumption. It is however looking meanligfully weaker for the key oil product the latest decade which is diesel. Diesel demand is more connected to industrial production and the investment cycle than gasoline and jet fuel. Diesel demand has grown on average 187 kbd the last ten years. For comparison the same number for gasoline is “only” 97 kbd. Year to date diesel demand is however up only 73 kbd in 2012 and the latest two months shows diesel demand was down 182 kbd in September and up a meagre 18 kbd in October.
•The above we feel is just confirming what we have been saying for most of 2012, which is that we expect the oil demand growth related to industrial production and the investment cycle to show weaker growth numbers in the coming ten years than what we have seen in the past ten years. We still expect China to be the best growth country in the world for oil demand, but instead of averaging 0.5 million b/d (about 8% yearly growth) which is the average demand growth the last ten years, we expect that number to come in at about 0.3-0.4 million b/d in the coming ten years. It will still be the largest growth in the world but somewhat weaker than what we have been used to from China.
•Other Chinese oil data points worth mentioning from the October statistics:
•Refinery throughput fell from 9.47 in September to 9.20 million b/d in October
•Crude imports jumped from 4.9 million b/d in September to 5.6 million b/d in October
•(the Chinese government did however cut the end user prices on gasoline and diesel by about 3% on November 16 and that could reduce the Chinese refiners appetite for crude going forward)
•Inventories of refined products increased by 1.03% in October according to Xinhua News Agency (this reduced calculated demand by about 40 kbd)
•Domestic crude oil production was 4.2 million b/d which is about 30 kbd higher than last year
•China increased its imports from Iran from 384 kbd in September to 458 kbd in October
•This could be a problem to defend vs the US and the financial sanctions imposed vs importers of Iranian crude
Source: DNB