Global oil demand growth is expected to come in at a slightly lacklustre 0.96 mb/d this year, but the regions that are leading the growth are different from years past. One instance of this shift can be seen in Asia, where Indian oil demand is now growing faster than that of China, Barclays said in a report.

Chinese oil demand (9.8 mb/d) is more than double Indian demand (3.5mb/d). However, data available until July for this year show Indian oil demand growth (101kb/d) outpacing Chinese demand growth (-62 kb/d) (Figures 1 and 2). Indian oil demand growth has accelerated this year, growing an average of 3% so far (relative to the 1.8% overH2 13), while Chinese implied oil demand has struggled to recover from H213, when growth was 0.3%, and has instead declined on average 0.6% this year.

Stimulus measures over H2 14 could help bring aturnaround in Chinese oil demand growth. Indian oil demand growth, on the other hand, has organic domestic economic activity-linked factors still driving it, with the momentum expected to accelerate further next year, when Indian oil demand should grow 210 kb/d. In this context, prospects for diesel demand between these two countries are expected to be a key differentiating factor.

India recently achieved record diesel demand at 1.56 mb/d, while Chinese diesel demand has fallen 1% so far this year. In China, diesel demand growth has been pressured by a slowdown in construction activity linked with the ongoing property market correction, which our economists expect to continue. A contrast is seen in India, where construction activity remains healthy, with large-scale government financed projects expected to add further support.

Diesel usage in generators is another key difference, with China now having fewer power shortages than before, while India continues to have a deficit of about 4%, which will likely continue to be met by diesel generators. Mining-linked activities have also slowed in China, which has decreased diesel consumption. Indian diesel demand, on the other hand, is likely to face some pressure from the price deregulation, but growth avenues and a positive outlook on industrial activity are more than likely to offset this.

Elsewhere, in the refined product complex, Chinese gasoline demand is growing faster (at 10%) than India’s at 7%, but pressure in tier 2 cities in China on vehicle purchases could cap the pace of growth. In India, with the difference between diesel and gasoline prices narrowing, passenger car buyers are likely to be increasingly indifferent between gasoline and diesel cars, suggesting a boost in consumption for gasoline.

Overall, stockpiling trends continue to support Chinese crude imports, despite weak domestic demand. And Strategic Petroleum Reserve requirements are still expected to be filled over the coming months, which could offset some of the weakness in imports that would have otherwise come from lacklustre domestic indications. India also has SPR plans next year, albeit on a smaller scale than China. Imports to the country could also receive a boost upon completion of the 1.5 mt Mangalore and 2.5 mt Padur storage facilities by mid-2015.