China crude oil demand keeps decreasing

Although China's crude oil throughput scored the record high of 9.35 million barrels per day in early this year, sluggish petroleum demand has kept crude oil throughput lower after that. April and May figures were lower than a the previous year's level.

Crude processing in June is also estimated lower further, according to media reports. Two giant state owned firms PetroChina and Sinopec are currently processing 7,09 million bpd of crude oil in total, that is down 0.2% from a month earlier.

June is known as the season for regular maintenance at refineries. Since crude oil throughput in June 2011 also decreased 4.5% from the previous month, current situation might not represent a slump.

Meanwhile, many regional refineries except for two giants are reported reducing crude processing rate significantly due to weak demand and unfavorable refining margins. Refinery utilization rates are less than 30% in some area.

The problem is that very few people expect shortage of petroleum products in spite of the sluggish growth of crude oil throughput.

China recorded 8.1% growth on its gross domestic product in the first quarter in 2012, while the growth rate in the second quarter is forecasted to below 8% or even below 7%.
However, flat or smaller petroleum demand compared to last year suggests that these lower economic growth forecasts might be even being overestimated.

On the other hand, the above chart shows China's recent relatively steady crude oil imports compared to sluggish growth of throughput. The country's crude oil imports rose 18.2% on year in May, according to the customs data.

The surge of imports did not caused by the actual consumption of course. Since China has completed the construction of total 80 million barrels of the new strategic petroleum storage facilities by early this year, the filling into these facilities seems boosting crude oil imports.

The monthly gap between net crude supply and throughput in China was averaged at about 200,000 bpd in 2011, but it has increased to around 600,000 bpd in the first five months of this year.

The additional 400,000 bpd could be for the strategic reserve. If China plans to fill up the new storage facilities during half year, the additional volume is make sense.
Meanwhile, the country's crude oil imports are likely to decrease by the amount in the later half of this year after finished filling up the strategic oil reserve.