Downstream manufacturing and construction activities are quiet during the Chinese New Year, and real oil demand could see a soft patch in the first two months of 2013, Barclays said in a report.This year a major government reshuffle will be announced during the March legislative meetings, which could mean that projects are put on hold until important personnel decisions are made. Real diesel demand is therefore likely to stay moderate during Q1. Gasoline demand, on the other hand, may be elevated during the holidays but then smooth out.
Oil demand recovered along with industrial activities growth in China, most accurately reflected in power generation.
PMI has risen from 49.2 in August 2012 to 50.6 in December 2012, confirming that manufacturing has been expanding and driving a modest recovery ( Optimism is in the air , 11 January 2013). Property sales shot up sh arply after China lowered interest rates during the summer, and housing construction began to gain momentum from a low base.
As a result, driving indicators, such as traffic and truck sales, continued to improve. Truck sales fell by 10% y/y in June 2012 but gradually rose to report 5% y/y growth in December 2012. Truck traffic on select tollroads also rose from a 4% y/y contraction in May 2012 to 3% growth in Q4 12. The traffic Barclays monitored also showed a divergence of fortunes; traffic was more cyclical in the export-oriented areas but resilient in areas dominated by consumer driving.
Passenger vehicle driving was also more insulated from the downturn, which seems corroborated by consistently faster gasoline demand growth in recent years.
Gasoline demand finished the year at an average of 2 mb/d after adjusting for stock changes, up by 11% y/y, and diesel demand averaged 3.5 mb/d, up by 2% y/y.
Fuel oil and naphtha demand also rose in Q4 , driven by stronger demand for fuel and petrochemicals as well as improvement in teapot refinery margins when the NDRC raised prices in August and September.
Overall, for the year, fuel oil demand registered a small gain of 2% y/y to 624 kb/d, and naphtha demand rose 14% to 732 kb/d.
Source: Barclays