Now that final numbers are out on China’s oil data for September, the messages are mixed. As China does not provide direct demand data it has to be derived either from crude production, net crude imports and net product imports or from refinery throughput plus net product imports. Moreover, as there is no direct inventory data, movements in inventory also skew demand calculations.
The first measure tends to produce higher, but more volatile, readings than the second and this is evident in the calculations for September. On the crude side calculation, demand dropped 6.3% YoY to 9.0mmbd (Figure 1) and also fell 2.3% MoM. On the refinery side calculation, however, demand increased a mirror image 6.3% to 8.9mmbd (Figure 2) and was flat MoM.
In our view, it is likely that the crude side calculation is unusually skewed as crude imports surged 0.6mmbd to 5.4mmbd in September 2010 for what remains the single largest import figure to date, hurting the 2011 YoY comparison.
In any event, even on the crude side calculation, cumulative YTD demand is up 5.3% YoY, while the same calculation on the refinery side indicates a YoY demand increase of 9.2%. Even on the lower calculation, the pace of demand growth is in line with the IEA’s current demand growth rate forecast for China in 2011 over 2010.
Recent economic growth figures for China, suggest a soft landing and while not obviously consistent with demand growth of 9.2%, they look consistent with underlying oil demand growth of at least 5%, particularly as the automobile market remains on track to add another 13-14 million units this year. While that might represent only modest YoY growth, it is still around 30% more than in 2009 and 100% up on 2008.