SINGAPORE, July 12, 2016 /PRNewswire/ -- China's apparent oil demand contracted by 2.7% in May 2016 from a year earlier to 10.88 million barrels per day (b/d), according to a just-released analysis of Chinese government data by S&P Global Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets.

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Refinery throughput in May averaged 10.46 million b/d, data from the China's National Bureau of Statistics (NBS) showed June 12. This was a 0.04% decline year over year and a 4.3% drop month over month.

However, net imports of key oil products slumped 41.4% from a year earlier to an average 423,000 b/d in May, as exports of transport fuels climbed higher, data from China's General Administration of Customs showed.

The contraction in oil demand in May represented the fourth consecutive month of negative growth and was due to declines in gasoil and fuel oil demand, amid slowing economic growth.

Over the first five months of 2016, apparent oil demand averaged 11.1 million b/d, down 0.8%. In contrast, apparent oil demand had increased by 9.1% during January-May 2015, when lower fuel prices incentivized end users to boost consumption.

China's oil demand growth is expected to moderate significantly in 2016 as gross domestic product growth slows on the back of economic rebalancing. China's government data shows the economy expanded by 6.7% in the first quarter of this year, a decline from 6.8% in the fourth quarter of 2015.

China's 2016 apparent oil demand is forecast to grow by less than 2%, according to Platts China Oil Analytics, an on-line platform for supply/demand and trade data, of S&P Global Platts.

Gasoil
Apparent demand for gasoil in China contracted by 13% year over year in May and this was partly reflected in exports of the fuel hitting a new record high volume of 356,000 b/d during the month as refineries grappled with domestic oversupply and stagnant consumption levels.

The fuel is used in the industrial and heavy transport sectors. Demand has taken a hit in recent years on the slowdown in the manufacturing sector, amid China's transition towards more service-sector-led economic growth.

Over January-May this year, gasoil apparent demand has fallen by 8.5% to an average 3.3 million b/d. This volume is the lowest level since the same five-month period of 2010.

"Platts China Oil Analytics forecasts gasoil apparent demand to fall by more than 3% in 2016, although more stimulus measures in the form of monetary easing and infrastructure investment could provide some upside to consumption," said Song Yen Ling, senior analyst with Platts China Oil Analytics.

Gasoline
Bucking the wider trend this year, apparent demand for gasoline in May fell by 1.3% to average 2.68 million b/d, which was also a 7.1% month-on-month decline, according to S&P Global Platts calculations. The contraction in the apparent demand figure was due to a 105.7% year-on-year increase in gasoline exports.

China's gasoline market has witnessed intense competition this year following increased refining activity by independent refiners, as well as higher production by fuel blending companies. This has resulted in higher supply in the domestic market and led to state-owned companies exporting significantly more volumes of gasoline compared with 2015.

However, data on gasoline sales by independents and fuel blenders is not readily available and is likely not fully captured by the official government statistics. This helps explain why China's gasoline apparent demand this year has risen only 5.9% over January to May, compared with 9.4% over the same period of 2015. Passenger vehicle sales however remained strong, rising 9.8% year over year in May, suggesting consumption growth is still very robust.

Fuel Oil
China's fuel oil apparent demand continued its downward trajectory as independent refiners which now have access to imported crude oil no longer need fuel oil as a primary processing feedstock. This has been happening since the second half of last year, when the government deregulated crude oil import rights and started giving out import quotas to independent refiners in China.

In May, fuel oil apparent demand fell 17.3% year over year for the fourth consecutive month, bringing demand during the first five months of 2016 to an average 737,000 b/d. This is an 18.6% contraction from the same period of 2015. To date, a total of 1.2 million b/d of crude oil import quotas have been approved for these refiners.

With fuel oil not as popular with refiners as processing feedstock, consumption is mainly focused on the bunker market, with some buying by petrochemical plants as feedstock. In contrast, independent refiners' appetite for crude oil has surged significantly in 2016.

China's crude oil imports between January and May surged 15.7% to 7.62 million b/d, surpassing growth of 8.8% seen in 2015. Meanwhile, fuel oil imports into China have slumped nearly 40% to just 307,000 b/d over the same period.

MONTHLY CHINA OIL DATA IN '000 B/D

                      May '16        May '15        % Chg      Apr '16       Mar '16      Feb '16     Jan '16
                      -------        -------        -----      -------       -------      -------     -------

    Net crude imports          7,623          5,465       39.5          7,897         7,562        8,018       6,287
    -----------------          -----          -----       ----          -----         -----        -----       -----

    Crude production           3,989          4,314       -7.5          4,053         4,108        4,167       4,167
    ----------------           -----          -----       ----          -----         -----        -----       -----

    Apparent demand           10,881         11,184       -2.7         11,364        11,111       11,101      11,035
    ---------------           ------         ------       ----         ------        ------       ------      ------

    Sources: China's General
     Administration of Customs,
     National Bureau of Statistics, S&P
     Global Platts

Month-to-month demand in China is generally viewed to be subjected to short-term anomalies which are of interest and important to note, but often fail to reveal the country's underlying demand trends. Year-to-year comparisons are viewed by the marketplace to be more indicative of the country's energy profile.

*S&P Global Platts calculates China's apparent or implied oil demand on the basis of crude throughput volumes at the domestic refineries and net oil product imports, as reported by the NBS and Chinese customs. S&P Global Platts also takes into account undeclared revisions in NBS historical data.

The government releases data on imports, exports, domestic crude production and refinery throughput data, but does not give official data on the country's actual oil consumption figure and oil stockpiles. Official statistics on oil storage are released intermittently.

In view of some significant shifts in Chinese consumption and trade patterns in recent years, S&P Global Platts has revised its methodology starting July 2015 to include production and net imports of liquefied petroleum gas (LPG), as well as imports of petroleum bitumen blend, a popular imported feedstock for China's teapot refineries.

S&P Global Platts has also refined its calculation of exports of jet fuel and fuel oil to exclude international marine bunker sales and aviation fuel delivered to international flights. This also impacts net imports, and hence apparent demand calculations.

All historical figures used for comparison have also been calculated using the new methodology to ensure consistency.

S&P Global Platts aims to release its monthly calculation of China's apparent demand between the 18th and 26th of every month via press release and via its website. Any use of this information must be appropriately attributed to S&P Global Platts. Note: S&P Global Platts uses a conversion rate of 7.33 barrels of crude per metric ton, the widely-accepted benchmark for markets East of Suez.

For more information on crude oil, visit the S&P Global Platts website at www.platts.com. For Chinese-language information on oil and the energy and metals markets, visit http://www.platts.cn/.

Contact
Americas: Kathleen Tanzy, + 1 917 331 4607, kathleen.tanzy@platts.com

About S&P Global Platts

At S&P Global Platts, we provide the insights; you make better informed trading and business decisions with confidence. We're the leading independent provider of information and benchmark prices for the commodities and energy markets. Customers in over 150 countries look to our expertise in news, pricing and analytics to deliver greater transparency and efficiency to markets. S&P Global Platts coverage includes oil and gas, power, petrochemicals, metals, agriculture and shipping.

S&P Global Platts is a division of S&P Global (NYSE: SPGI), which provides essential intelligence for individuals, companies and governments to make decisions with confidence. For more information, visit www.platts.com.

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SOURCE: S&P Global Platts