OPEC crude oil demand is capped

Crude oil production by OPEC seems peaking out in June. Since global balance of petroleum supply and demand are still oversupply, OPEC member countries are hesitant to make up for supply disruption from part of members.

Crude oil production by OPEC 12 member nations fell 80,000 barrels per day on month in June to 30.38 million bpd, according to survey by Reuters. Decrease mainly came from Nigeria, Libya and Angola. US Energy Information Administration also estimated that OPEC June crude oil output fell 300,000 bpd from a month ago to 30.1 million bpd.

OPEC's crude oil production had decreased until the first quarter this year after peaked in the second quarter 2012. Outputs had rebounded during April and May, but fell again despite demand season in the northern hemisphere has not finished.

OPEC members started to hike their production in 2011 in order to make up for sudden supply disruption from Libya due to civil war. But Libyan supply had resumed in late 2011 and added supply sharply.

Oil shipments by OPEC members excluding Angola and Ecuador reported by Oil Movements show that the organization members' shipments were not so large in the Q2 2012 despite the high production rates. Volume of oil shipments in late 2012 was even higher than Q2 despite production fell by more than 1 million bpd from the peak.

The above chart also suggests that demand for OPEC oil has been capped because of increasing oil supply from non-OPEC producers.

Estimated quarterly call on OPEC crude oil calculated by supply and demand forecasts by some institutes are as follows. All the numbers for Q2 2013 were below actual estimated production. It means OPEC crude oil has been oversupplied in the past couple of months.

Regarding call on crude oil after July, forecast by International Energy Agency continues to be under the production quota of 30 million bpd. Meanwhile, forecasts by EIA and OPEC are close to current estimated production level. Since non-OPEC producers are expected to increase output steadily, call on OPEC crude oil is not seen to be higher even in Q4 in spite of winter demand season.

OPEC members are hesitant to increase oil production due to fears of weak demand. Therefore, decrease of supply by force majeure in Nigeria and so on is not supplemented by other members. OPEC crude oil output is likely to remain at slightly above the production quota of 30 million bpd in the near term.

Credibility of Chinese petroleum statistics

Chinese statistics have been suspected for long. Recently, the nation's trade statistics were reported to be significantly padded.

Regarding the petroleum statistics, National Bureau of Statistics and General Administration of Customs announce previous month's data on around 10th day of every month. Those figures also have been suspected how reflect real industrial movements since the monthly release timing is too early.

On the other hand, National Development and Reform Commission and Xinhua News are releasing other petroleum related data on after 20th every month.

The below chart compares monthly crude oil processing data released by NBS and NDRC. NBS's data always exceed NDRC's numbers, but the tendency of both figures are similar.

However, the difference between both numbers widened from about 800,000 barrels per day in early 2012 to 1.36 million bpd in December. After that, the difference has shrunk to about 600,000 bpd in May this year. NBS's data in the 4th quarter 2012 seemed to be padded.

Estimated monthly change of crude oil stocks that was calculated based on customs data and NBS's figures is not match with Xinhua News data, as well.

China's crude oil inventories were increased significantly in April and May 2013 according to data by customs and NBS, but Xinhua News data do not show such change.

Since statistics data often do not match by the difference in announcement agency in many countries, tendency is more important than each figure. However, no one can trust data that are unsure how sloppy.

Japan's electricity demand falls lower than just after quake period

Electricity supply in Japan fell 0.8% from a year ago in May to 68.5 billion kilowatt-hour, according to the Federation of Electric Power Companies. Electricity supply in the country has decreased on year in the past five consecutive months. Since power demands in spring and autumn are not affected by heat wave or chilly weather, lower electricity demand in these seasons suggests fundamental slump.

Japanese electricity demand in April and May this year were also lower than that in the same period in 2011, when severe earthquake damaged many power generation facilities and turmoil in transportation system depressed industrial activity across the country.

Petroleum consumption for thermal power generation by Japanese 10 major utility firms fell 24.9% from a year earlier in May to 347,000 barrels per day, while use of liquefied natural gas decreased 4.5% on year to 4.21 million tonnes. Petroleum consumption has decreased by more than 20% on year in the past four consecutive months.

Indicators of industrial trends such as Industrial Production Index have been recovering since late last year. However, electricity demand does not follow the movement recently. Although both industrial production and electricity demand are used for calculation of business coincident index in Japan, current electricity demand seems not to reflect the industrial trend due to extreme power saving.

China energy use turns steady, but not enough to lift economy

China's crude oil imports fell 6.0% on year to 5.66 million barrels per day in May, according to the Customs data. Meanwhile, the nation's crude oil processing in May rose 2.4% from a year ago to 9.23 million bpd, according to the National Bureau of statistics.

China's crude oil imports in the first five months in this year were 2.0% lower than a year ago, however, previous year's import figures included about 400,000 bpd of strategic reserve. If compare imports figures excluding the strategic reserve, Chinese crude oil imports in Jan-May could be about 6% higher on year.

Crude oil processing in China has slowed down this year from the strong growth in the second half of 2012. But recent growth rates are relatively steady than the average rate during mid 2011 and mid 2012. Growth of electricity generation is also recovering compared to the previous year's level.

Slow down of Chinese energy consumption seemed to have bottomed out in the second quarter of 2012. Currently growth of energy use is recovering. On the other hand, Chinese industrial production in May only rose 9.2% on year, it was the lowest growth since August 2012. Processing trades in the month was 4.4% lower from a year earlier, as well.

Although energy consumption shows rebounding, industrial activities are sluggish. Less than 5% growth of energy consumption is unlikely to sustain steady economic growth in China.

China's commercial oil inventory is low

China's May official Purchasing Managers Index rose 0.2 percent points from a month ago to 50.8 despite market players expected below 50 figures. The nation's economic growth seems to be recovering especially in manufacturing sector. Recent uncertain forecasts for Chinese economy might be eased.

However, if Chinese economy shows steady growth, current low commercial petroleum inventories might not be able to meet energy demand.

China's crude oil inventories excluding strategic reserves as of end of April inched up 0.1% on month, while petroleum products inventories fell 3.3% from a month ago, according to Xinhua News. Although Xinhua does not supply actual inventory figures, end-April crude oil stocks were estimated at 3.8% lower than a year ago level based on calculation by previous monthly changes. Petroleum products inventories were estimated 4.8% lower than a year earlier. Products stocks have decreased year-on-year in the past 3 consecutive months.

Chinese crude oil inventory is usually reach the annual peak in the third quarter, then decreases to the bottom in the early next year. Petroleum products inventories, on the other hand, hit the bottom in autumn and increase to the peak towards next year's Lunar New Year holidays.

Crude oil processing in the first half of 2012 was in slump, therefore crude oil inventory rose above 32 million tonnes. Then inventories had decreased significantly, since processing rebounded sharply in the later half on the year. Crude oil supply (domestic production and imports) exceeded processing in only four months during July 2012 and April 2013. In rest of months, volume of crude oil processing exceeded supply.

Growth of petroleum inventories during the period was relatively lower than processing. Petroleum products stocks as of end-February 2013 fell 3.9% on year. It suggests that shipments of petroleum products in China were steady between mid 2012 and early 2013. That is match with the fact that Chinese PMI has exceed 50 over the past eight months.

However, growth of Chinese apparent oil demand is seen shrinking. The apparent demand in 4Q 2012 was 7.8% increase on year, then it was 4.2% growth from a year ago in 1Q 2013, according to Platts. But the growth rate was only 2.1% on year.
The PMI figures in the latest few months are even higher than Q4 2012. Actual energy consumption and business confidence seem to have gap.