China’s implied oil demand grew 3 percent in 2014 as China added refinery capacity and motor fuel use rose, with crude throughput and imports picking up steam in the fourth quarter and ending at records in December.
China consumed roughly 10.06 million barrels per day (bpd) of oil in 2014, according to Reuters calculations based on preliminary government data and that exclude inventory changes.
It was the first year the implied oil demand figure broke 10 million bpd, and came as China lifted its refining capacity roughly 600,000 million bpd and crude imports continued to grow. China imported a record 7.15 million bpd of crude last month to feed its growing throughput capacity and also help fill strategic reserves.
The International Energy Agency (IEA) had forecast in its most recent monthly report that China’s oil demand grew 2.7 percent last year, adding that it sees growth slowing to 2.5 percent in 2015.
“We know that oil demand was improving in the second half,” said Simon Powell, head of Asia oil and gas research at CLSA in Hong Kong, noting that gasoline consumption has been strong and that diesel use likely picked up in the latter half of the year to fuel trucks moving increased domestic shipments of coal.
“So it’s not a huge surprise to us.”
Powell added that high refinery throughput is also being helped by improved margins, given the lag between falling oil prices and regulated cuts to bulk fuel prices.
Reuters calculates implied oil demand by combining official figures for refinery throughput and net imports of refined product, without taking into account changes in inventories.
Implied oil demand for December rose 3 percent from November to a record 10.58 million bpd, the fourth straight month above 10 million and up about 5 percent from a year ago.
China’s overall economy grew 7.4 percent last year, missing a government target and marking the weakest expansion in 24 years. Growth in the fourth quarter held steady at 7.3 percent, slightly better than expected but at its weakest for a three-month period since the global financial crisis.
China’s refinery throughput for 2014 rose 5.3 percent to 502.8 million tonnes, or 10.06 mln bpd, data from the National Bureau of Statistics (NBS) showed.
In December, refinery runs hit 44.58 million tonnes, or 10.5 million bpd, the highest on record, up 2.1 percent from November and 6.3 percent from the same month last year.
However, it is not known how much of China’s refined oil products might have gone into storage in December. Monthly percentage changes for commercial inventories will be released in the coming week, but without absolute values.
There also could be some early stockbuilding in advance of the Lunar New Year holiday in February and the upcoming shutdown season, Powell of CLSA said.
The high crude throughput and weak domestic demand growth made China a net fuel exporter for six months of 2014. For the year, China’s net fuel imports were down 97 percent to 330,000 tonnes.
Net imports in December were 380,000 tonnes, or 54,000 bpd, versus 740,000 tonnes a year ago and net exports of 70,000 tonnes in November, customs data showed last week..