Chinese crude oil demand is expected to grow at a moderate pace of 350 thousand b/d (3.5%) in 2014. This December is expected to see better demand for oil products on restocking requirements. Demand for crude oil should rise from current levels on a m/m basis due to the end of refinery turnaround and the start up of new capacity, noted London based Barclays in its recent market analysis.

The aftermath of the pipeline blast is also expected to relay positive effects in December’s data set. The blast had already tightened Chinese product market balances, especially for diesel, and Sinopec is likely to cut back on diesel and jet exports from the Qingdao refinery for the rest of the year, according to Reuters.

Now, with the market tighter and margins consistent, it has an incentive to raise runs to build some cover. That said, with 2012 demand growth concentrated in Q4, comparisons are expected to be difficult and upside surprises could be limited given the backdrop of modest economic growth and banking liquidity risks emerging domestically.

Meanwhile, overall, factoring in the refinery runs, and the product import-export data, Chinese implied oil demand in November gained slightly from October, rising to 9.95 mb/d, but falling 5% y/y given the high base. While refinery runs improved over the first half of November, the pace of the recovery over the second half of the month remained lacklustre.

Subdued economic activity in China over November, with both industrial production and power generation registering slower y/y growth in November compared to October was one of the reasons behind weak oil appetite and refineries rationalising runs.
Source: Barclays