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.

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