Crude Oil ( ) Brent Crude ( ) Natural Gas ( ) S&P 500 ( ) PHLX Oil ( )
Current SNP Stock Info

Chengyu: Chinese demand for diesel could peak by 2017

Fu Chengyu, Chairman of Chinese oil major China Petroleum & Chemical Corp. (Sinopec, ticker: SNP), said that he expects Chinese oil demand to peak much sooner than many Western companies and analysts are predicting. During a recent conference call, Chengyu said that he expects China’s demand for diesel, the fuel that most closely tracks economic growth, to peak in 2017, reports Bloomberg.

If correct, Chengyu’s predictions could spell trouble for oil companies counting on the continued demand growth from China and other developing countries in order to maintain the growth of their own businesses. The high point in gasoline sales is likely to come in about a decade, says Chengyu, and the company is already preparing for the day when selling fuel is what he called a “non-core” activity.

The West still expects increased demand

BP’s (ticker: BP) latest public projection for China expects demand to grow, but with other fuel sources taking a larger share of the total energy consumed in transport. “Energy consumed in transport grows by 98%,” says the report. “Oil remains the dominant fuel but loses market share, dropping from 90% to 83% in 2035.”

“From 2010 to 2040, transportation energy needs in OECD32 countries are projected to fall about 10% while in the rest of the world these needs are expected to double,” ExxonMobil (ticker: XOM), said in a December report on its view of the future. “China and India will together account for about half of the global increase.”

Despite predictions that demand will continue to increase, there is already some evidence that China’s rate of demand is slowing. Diesel demand declined last year, and growth in crude oil consumption has shriveled, reports Bloomberg. Crude use is projected to rise about 3% this year, less than half the rate of the total economy.

India still thirsty for moreChinese and Indian Oil Demand Growth WSJ

In February, India consumed a record 3.91 MMBOPD, up 9.4% year-over-year, according to Amrita Sen at Energy Aspects. So far this year, India’s usage is up more than 6% year-over-year, four times faster during the same period last year, reports The Wall Street Journal.

India’s oil needs in absolute barrels is not enough to replace the demand seen in China, but it is getting close to growing at the same pace as China. Analysts expect Indian demand growth of 140 to 200 MBOPD in 2015, not far off from the 190 to 300 MBOPD expected from the Chinese.

Whether or not India can maintain these rates of growth remains unclear. The longest period modern India has managed to expand its fixed assets in double digits annually (in inflation-adjusted terms) is five years, from 2003 to 2008. China, by contrast, was able to maintain these levels of growth for more than a decade.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.