Energy demand suggests China's economy slow down

Chinese Gross Domestic Product during the third quarter recorded the highest growth since Q4 2012. Although the crude oil market is supported by the optimistic forecasts against the petroleum demand in China, a recent slump in energy demand in the nation suggests the economy slow down in the near term.

The industrial production index in China rose 10.2% from a year ago in September, according to the National Bureau of Statistics. It was the second consecutive double digits growth following August. Meanwhile, the country's power generation and petroleum demand were slowing down in the same month. Especially, crude oil processing posted a year-on-year decrease for the first time since June 2012.

Energy demand in China had continued to increase during the second half of 2012 when the nation's economy showed a certain recovery. However, energy consumptions are stalling already in this year. The change could affect the economic growth in the near future. If the energy demand can not recover, China is not likely to record the strong economic growth like last year.

The following chart shows supply and demand of crude oil in China. Since the government has not released the September's domestic crude oil production yet, the chart estimated it as the same level as August.

The total crude oil supply of net imports and domestic production have exceeded the 10 million barrels per day level recently. On the other hand, crude oil processing had exceeded the key level between November 2012 and February 2013, but has been sluggish after that.

Automobile production in China rose 15.3% from a year ago in the first nine months in this year, compared to the 6.3% on year increase during 2012. The recent sluggish total demand of petroleum despite the stronger gasoline consumption suggests a significantly weak diesel demand from the transportation sector and a slump in fuel oil use by the manufacturing sector.