16-08-04

China's demand for oil will still maintain a rapid growth in the second half of this year and the absolute demand will not be lower than in the first half, but the growth will have a big fall. The full year demand growth is predicted to grow at a rate above 12 %, the highest over the past 20-plus years.

Due to the slowdown in the demand growth plus the possible drop in international oil price, the Chinese oil product market in the second half is estimated to be no better than in the first half and the bullish characteristics of the market is likely to be weakened. In the second half, the contradiction will remain between power supply and demand in China, but it will be eased moderately in some parts.

According to estimation of the State Power Regulatory Commission and the China Power Industry Federation, the whole country's electricity shortage will expand from 20 mm kW in the second quarter to 25-30 mm kW in the third quarter, and decline to 10 mm kW in the fourth quarter thank to the operation of 15.85 mm-kW new generating units.

Thus China's demand for oil fuelled for power generating will grow rapidly in the second half, but the growth is expected to slow. The consumption of diesel oil for power generating in the third quarter will be close to that of the second quarter, staying around 1.6-1.7 mm tons; and it will plunge to around 1 mm tons in the fourth quarter in wake of the reduction in the electricity shortage.

Though the recent campaign to control the overloading of motor vehicles in expressways has led to a decrease in the flow of some freight trucks in a short period of time, from a long-term view, the effort will result in an increase in the transport frequency and promote the consumption of oil products.
In addition, the rapid growth in the production and consumption of autos will give a strong support to the oil demand. Despite the modest decline in a recent period of time, auto consumption will still maintain a rapid growth. The stable growth of auto registration remains to be an effective support to China's oil demand growth. What's more, China's ship industry has showed a trend of fine development, which also contributes to a great demand for oil.

The consumption of oil by agriculture is likely to become another growth point of China's oil demand in the second half. Since this year, the agriculture has sped up development pace thanks to the state's all-out support and the price hike of farm and sideline products.

At present, the per capita energy consumption in rural areas is fairly low. When the farmers' income is raised, the rural per capita energy consumption will rise, which will produce an assignable influence on the oil demand growth. Moreover, farming mechanization has been accelerated since this year, with the state's strong support and advocacy and the rural economic situation taking a turn for the better.

Meanwhile, the domestic oil production growth is likely to fall. Restricted by resources, domestic output of crude oil will maintain a small growth. The monthly output will be averaged at 14.5 mm tons and full-year output around 172 mm tons. Affected by the slowdown in oil demand and a high base in the year-earlier period, the crude oil processing volume growth will drop slightly in the second half, while the output of oil products will be a little more than in the first half.
China's import of crude oil will continue to grow rapidly in the second half. The full-year net import is estimated to reach 108 mm tons. Stimulated by strong demand on domestic market and possible price drop on the international market, the import of oil products will increase at a much fast speed in the second half, while the export will fall further.

A report on the website of the Ministry of Commerce predicts that China's demand for crude oil will be 285 mm tons in 2004, up 12 % over 2003. It also predicts that the country's coal output will reach 1.85 bn tons, up 11 %, and coal demand, 1.78 bn tons, up 12.9 %.

It is estimated that China's import of crude oil will break 100 mm tons to reach 110 mm tons this year. Some analysts even held that driven by sustained sharp growth of the national economy and the strong demand for power and diesel oil, China's demand for crude oil is likely to approach 300 mm tons in 2004 despite the influence of the high oil price and Russia's Yukos incident.

Source: Xinhua News Agency