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 K
jus, 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.”
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.
