BEIJING, Dec 24 (Reuters) - China’s apparent oil consumption crept up just 1.0 percent in November from a year earlier, hit by fuel shortages that persisted through the month in spite of a string of government moves to smooth supplies.
China’s refiners retreated from the market in the autumn because low state-set prices, combined with global crude markets climbing toward $100 per barrel, were causing massive losses.
Faced with the worst fuel crisis in four years, Beijing raised prices at the start of November to tempt its plants to increase runs and issued a set of directives to remind oil majors of their “social duty”.
The shortages eased, but only slightly, nudging apparent consumption up about 2 percent from October levels to 6.96 million barrels per day (bpd), but leaving it just 1 percent above a year ago, Reuters calculations from official data showed.
Net imports of oil products were also the lowest since May 2005, despite the highest diesel imports for three years, as oil firms also shunned loss-making purchases abroad.
For the year through November, implied demand -- net imports plus refinery output, but excluding inventory changes which are not reported -- rose a slightly more robust 3.3 percent to 6.91 million barrels per day, the figures showed.
(For details of demand growth click [ID:nBJI000014])
The 10 percent increase in fuel prices, effective Nov. 1, was not enough to bring refiners back into profit.
These key swing producers provide up to 15 percent of supply, so it is hard to keep the market well supplied without them.
“Offsetting the refinery throughput increases by the large refiners, the small independent refiners have not increased their runs,” said independent analyst Paul Ting.
But under pressure from Beijing, and perhaps hoping for a repeat of the multibillion dollar compensation packets handed out to Sinopec in the last two years, the two majors appear to be reining in maintenance and increasing output fast.
“For the next few months, China’s demand growth should continue to improve as refiners were mandated to increase runs,” Ting added in a research note.
2008 SEEN STRONGER
The slow end to the year makes it increasingly unlikely demand growth for 2007 will reach analysts’ forecasts of 6 to 8 percent.
“We believe that pent-up demand will not be entirely met over the rest of this year ... As such we have slightly revised down our Chinese forecast,” the International Energy Agency said in its latest monthly oil market report.
It now expects 2007 demand growth of around 5.2 percent, but a pick-up next year.
“Assuming that supply issues are addressed, demand growth should accelerate in 2008,” the report added.
Global crude markets CLc1 are stuck around $90 and with November inflation at an 11-year high, Beijing is reluctant to raise prices again. But a temporary suspension of a major tax on imported diesel, decided earlier in December, may help.
The government has opted to eliminate for four months the 17 percent value added tax (VAT) charged on imported fuel, an unexpected fillip for refiners who have rushed to the international market to secure supplies.
Crude imports which climbed just 0.5 percent in November still reached 150.3 million tonnes for the first 11 months of the year and are likely to breach the 160 million tonne mark traders expected for the year, boosted by buying for the country’s recently launched strategic oil reserves.
Beijing said last week its 33 million barrel government oil reserve tanks in east China’s Zhenhai were full, giving the first official confirmation of the amount of oil stored at the site.
Industry sources have told Reuters that most of the oil in the Zhenhai tanks was pumped in the first half of the year, before global crude oil prices rallied to nearly $100 a barrel.