OREANDA-NEWS.  August 22, 2013. China's apparent oil demand in July rose 6.6% year on year to 41.52 million mt or an average 9.82 million b/d, according to Platts' estimates based on recently released preliminary government data.

Apparent oil demand was, however, 1.7% lower than the 9.99 million b/d seen in June.

China does not release official data on oil demand or commercial and strategic oil inventories. Platts calculates apparent oil demand based on official data on refiners' crude throughput and net oil product imports.

Apparent oil demand last month was boosted primarily by higher refinery throughput, which rose 7.1% year on year to an average 9.53 million b/d, according to preliminary output data released Friday by the National Bureau of Statistics. Refinery runs in July dipped 1.5% from 9.68 million b/d in June.

Oil product imports in July rose 5.2% year on year to 3.25 million mt, although oil product exports surged 14.7% year on year to 2.03 million mt, preliminary trade data released by the General Administration of Customs on Thursday last week showed.

This brought net imports of oil products to 1.22 million mt in July, down 7.6% year on year.

HIGHER APPARENT DEMAND GROWTH RATE IN 2013

The year-on-year growth rate in apparent oil demand in July was lower than June's 11.7% but higher than the 2.5% recorded in July 2012.

In a note on Friday, Barclays Research said last month's data suggested that oil demand in China "has stabilized."

Apparent oil demand growth in June was the highest since February 2011 because of refinery runs rebounding from a year earlier.

The relatively higher refinery throughput in June led to a build in gasoline and diesel stocks, which led to "a more cautious note in July" as far as Chinese refiners were concerned, Barclays said, adding that scheduled maintenance at some units also curtailed products output.

Inventory data due later this month from state news agency Xinhua will likely shed some light on China's true underlying oil consumption in July, consultant Paul Ting said in a report Monday. "But the firming demand seemed to be founded upon the firming macro [data], which is significant," he said.

STABLE ECONOMY

On the macroeconomic front, China's industrial production grew 9.7% year on year, up from 8.9% year on year growth in June.

The country's total exports grew 5.1% year on year in July, a turnaround from June's 3.1% year-on-year contraction, while total imports grew 10.9% year on year, following a 0.7% year-on-year contraction in June.

Fixed asset investment growth was 20.1% year on year in July, rising from 19.3% in June.

HSBC Research said the stronger-than-expected trade data suggests some stabilization of external and domestic demand conditions, which should see further support once the government's recent economic measures start to filter down.

Positive data from the petrochemical and property sectors and recent reassurances from Beijing suggest that the economy is likely to stabilize, Barclays said.

On Monday, Nomura Research said the July data suggests "the economy is proving resilient to credit tightening and has stabilized." The government will likely maintain its current policy mix of keeping monetary policy tight and leaving property markets relatively free for the remainder of the year, allowing the infrastructure and property segments to support the economy, it added.

Nomura said it is now more bullish and sees a 20% probability of GDP growth in China dipping below 7% in the third or fourth quarter, down from a 30% probability earlier.

Ting said that while "one or two months of decent demand growth do not necessarily translate to long-term trends ... across the board [the] macro recovery in July suggested a more favorable environment for China's future oil demand."

STRONGER YEAR-TO-DATE GROWTH

From January to July, China's total apparent oil demand increased 4.2% year on year to an average of 9.86 million b/d, according to Platts' calculations.

This was higher than the 1% year-on-year growth in apparent oil demand seen over January-July 2012.

Refinery runs rose 4.5% year on year to 277.05 million mt or 9.58 million b/d in the first seven months of this year, according to data from the National Bureau of Statistics.

Oil product imports rose 6.6% year on year to 24.85 million mt, while oil product exports surged 22.8% year on year to 16.73 million mt, which brought net imports to 8.12 million mt, down 16.2% year on year for January to July.