China Oil Demand Growth Slows

China's demand for oil in October 2012 was meaningfully weaker that it was the previous month.

The detailed Chinese oil data for October were reported yesterday. Calculated demand adjusted for inventory changes came in at 9.5 million b/d. This was meaningfully weaker than demand in September which was calculated at a record 9.76 million b/d. Chinese oil demand has hovered close to the 9.5 million b/d level since March.

If you want to make a bullish twist to that number you would use worlds like “Chinese oil demand continue close to record high levels”, or “Chinese oil demand surpassed 9.5 million b/d for only the 5th time in history”. The reality is however that it is the growth numbers we are mainly interested in when it comes to China. After all we are talking about the country that has been behind 0.5 million b/d of the 0.8 million b/d average global oil demand growth for the latest 5 years.

Diesel demand, which is more connected to industrial production and the investment cycle than gasoline and jet fuel, has grown on average 187 kbd the last ten years. For comparison the same number for gasoline is “only” 97 kbd. Year to date diesel demand is however up only 73 kbd in 2012 and the latest two months shows diesel demand was down 182 kbd in September and up a meagre 18 kbd in October.

The above is felt to confirm that oil demand growth related to industrial production and the investment cycle is likely to show weaker growth numbers in the coming ten years than what we have seen in the past ten years.