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REFILE-UPDATE 1-China oil demand in fastest growth in over 3 yrs
October 26, 2009 / 6:32 AM / 8 years ago

REFILE-UPDATE 1-China oil demand in fastest growth in over 3 yrs

(Refiles to fix second summary point)

* Sept demand up 12.5 pct, fastest since June 2006

* Robust growth, fed by record runs, off low yr-earlier base

* Easing fuel stocks provide solid support for real demand

By Jim Bai and Chen Aizhu

BEIJING, Oct 26 (Reuters) - China’s apparent oil demand rose 12.5 percent in September from a year earlier, the sixth rise in a row and the fastest rate since June 2006, as refiners operated at record rates amid a sustained recovery in economic activity.

However, the robust September rate, anticipated by some analysts, may have been inflated by a low base a year earlier when implied oil demand inched 2.3 percent as the global financial crisis began infiltrating into the world’s second largest oil market.

China used nearly 8.17 million barrels per day of oil last month, Reuters calculations based on official data showed on Monday, 460,000 bpd or 5.8 percent higher than August. For a table of China’s September oil demand, click [ID:nPEK284837]

The demand growth, the first double-digit rally since August 2006, came as China’s fuel stocks -- excluded from the calculations -- edged lower for the second month in a row, providing more solid fundamental support to global oil prices CLc1 now near one-year high just under $80 a barrel. [ID:nPEK138676]

“While we do not deny that other factors such as currency movements are influencing oil price, there are also important factors from the physical market that drove oil prices,” Paul Ting, an independent oil analyst, said in a recent note.

“It was not a coincidence that China’s demand strength in the past two months corresponded with oil price strength, nor was it a coincidence that oil prices were weak in the first quarter when China’s oil demand was weak.”

Demand for diesel, the main transportation fuel in China, grew 7.7 percent from a year earlier, the first increase since June and the fastest since Nov 2008, offering fresh evidence that industry activities were picking up.

Chinese refineries processed a record 7.99 million bpd last month, 14 percent higher than a year earlier, as growth in the world’s third largest economy quickened to 8.9 percent in the third quarter from 7.9 percent in the second quarter.

For a graphic of China's crude oil runs, please click: here

LOW BASE FACTOR

Analysts stressed the low base factor for last month’s double-digit expansion, which is likely to extend into coming months as demand in late 2008 slid sharply amid worsening impact from the global economic slowdown.

“Low base figure was one reason behind the double-digit demand growth,” said Qiu Xiaofeng, an oil analyst with China Merchants Securities. “Destocking began in September last year after hefty build-up in early months.”

A year earlier, China returned to its historical role as a net gasoline exporter while imports of diesel also slowed sharply, after frenzy pre-Olympics stockbuilding pushed fuel stocks to record rates.

“Double-digit demand growth rates were still likely in the coming months given surging car sales, rebounding demand and as well as base effect,” said Qiu.

After slowing to single-digit rate in 2008 for the first time in at least a decade, China’s car sales last month jumped 83.6 percent from a year earlier to a new high at 1.02 million units, data from China Association of Automobile Manufactures showed. [ID:nSHA335461]

Chinese oil demand shrank as steep as nearly 9 percent in early this year, but has been gradually moving out of the trough in past months thanks to Beijing’s continuous efforts to stimulate the economy, while many other countries were still struggling with faltering demand.

To feed record refinery throughput as China started a string of new crude units this year, China has brought in record amount of crude imports, the world’s second-largest after the U.S..

Crude imports in September at 4.35 million bpd, off July’s peak at 4.62 million bpd, were 11 percent higher than the average of 3.91 million bpd in the first nine months of this year and 22 percent more than the 3.58 million bpd in 2008.

For a graphic of China's crude oil imports, please click: here (Reporting by Jim Bai, Eadie Chen and Chen Aizhu; Editing by Clarence Fernandez)

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