Finally someone has sniffed out a bit of positive news from the land of Mao. In its latest Oil Market Update, Oslo’s DNB Bank sent out a research note entitled: “Remarkably Strong Oil Demand in China in December and Last Five Months Despite Weakening Economic Growth.”
Torbjørn Kjus, the bank’s oil market analyst reported that the Chinese oil stock numbers for crude and key refined products indicate that while refined product stocks grew by 4%, crude stocks drew down 3.9%, translating to a very strong calculated demand growth for December.
“We calculate that year-on-year demand growth for December came in at a very decent 510 MBOD (including adjustment for the inventory change in refined products). This must be characterized as very strong, particularly since demand growth in the first seven months of 2014 was about zero. It is interesting to note that the average demand growth in China seems to have improved quite significantly since oil prices started decreasing. The average demand growth for the last 5 months of 2014 (Aug-Dec) came in at 440 MBOD in our calculations,” DNB said in its note.
Kjus attributed the strong oil demand to increasing gasoline consumption. His team calculated Chinese gasoline demand increased “a very strong 440,000 BPD in December, and we calculate that the second half 2014 demand growth for gasoline came in at 273,000 BPD vs 150,000 BPD in the first half of the year.”
“The end user price for gasoline in China has been lowered many times since the global oil price started dropping in July,” DNB said in the note. “Maybe we are now seeing some price sensitivity in China for the first time. Car sales have in fact increased from 1.7 million in August to 2.4 million vehicles in December (new record with a solid margin, the old record was 2.15 million vehicles) and as written above it is really gasoline demand that is performing in the second half of 2014.”
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