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TW-International: China’s oil imports expected to show positive growth in H2, 2011.
After a first half drop off, China’s crude oil imports are expected to recover in the last 2 quarters of this year.
China in 2010 experienced the fast year-on year increase since the energy demand surge of 2004.
The Asian giant consumes double the amount of crude oil as it produces and with output growth flattening, imports are supplying an increasing portion of the demand, Barclays Capital informed TW-International. China strives for self-sufficiency in refined products and domestic demand conditions are a predominant driver of crude oil import demand.
In line with the strength in demand, crude oil imports have continued to climb consistently in the first half of this year (+7%), although they have not managed to keep pace with the increase in refining production, suggesting that destocking took place over the past two quarters.
In June, crude oil imports declined and it was due to product de-stocking, as large portion of refinery capacity was reportedly offline for maintenance, while product imports only rose moderately. The partial rebound in July, support this view, Barclays Capital informed TW-International. Added to this, data from the transport sector paints a strong picture for both freight and passenger traffic in June, indicating that volumes expanded at or above the average pace in 2011 through May.
"China undertook large refining capacity expansions over the past three years – adding a combined 2 million barrels per day capacity in 2009 and 2010 – and a further 1.5million barrels per day is due to come on line in the 2011-12 timeframe. In our view, the refining system has the necessary flexibility to cope with demand growth over the next few years, which should limit the need to turn to the refined product import markets in a sustained fashion. Thus, we expect higher demand to continue to be met primarily via higher refinery runs and crude imports through the rest of the year," Barclays Capital said.
"Overall traffic statistics point to a gradual easing in both passenger and freight traffic expansion in recent months, albeit growth rates are still high relative to historical averages. We would expect this trend to continue in H2, and traffic growth to normalize further – as the pace of economic expansion moderates. Diesel and gasoline demand growth should ease accordingly, with the pinch of lower car sales also likely to start filtering through."
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