A milestone in China
( This text is from the Barrel Blog on Platts.com. I was chatting about these issues last week, here: twitter.com )
Paul Ting is an independent analyst who had been one of the top Wall Street equity analysts. He focuses now on China, and his analysis of recent data and information from his sources in that country has led him to conclude that the country passed a significant demand mark last month.
According to Ting, Chinese demand passed 8 million b/d for the month, for the first time. Specifically, it rose to 8.43 million b/d, up from 7.919 million b/d the month before.
"This is consistent with our forecast that the June demand growth is likely to reverse the anemic demand growth witnessed in April and May, which averaged at 3.3%. Our prior previews indicated that China's June demand growth may double the growth of the April and May level," Ting said.
Beyond the numbers, here was the most significant sentence in his brief report: "The growth in Chinese oil demand basically balances the 'demand destruction' witnessed in the US."
That's really not that surprising, but Ting's math is still jolting. Most of the estimates of organizations such as the International Energy Agency have called for total demand to rise in 2009 on a simple formula: declines in demand from developed nations will be less than the growth from developing nations such as China and India, and the net result is a growth in demand, high prices notwithstanding.
But the sort of increase that Ting concluded went on in China in June is way past most other analyst estimates, and if true and is sustained, it means that their demand forecasts are going to need to be ratcheted up.
Or maybe it's just the Olympics. As Platts' David Ernsberger and Clarice Chiam reported recently, the Chinese demand for diesel has been soaring as of late.
"A powerful surge of Chinese demand for gasoil has in recent weeks spun the traditional flows of gasoil from Asia to the Western world into reverse, slamming shut the pricing economics that traditionally finance a small arbitrage movement of gasoil from Asia to the US," they wrote. Part of that was growing demand for diesel to rebuild Sichuan province after an enormous May earthquake.
But the country also appears to be hoarding diesel to run emergency generators that might be needed during the Olympics. This step, Platts reported, "has added a new layer of demand on top, as China is to progressively shut down traditional, coal-fired power generators in a frantic bid to clean up the air in Beijing. Combined, China's appetite for diesel in Beijing and Sichuan has turned East-West gasoil economics on its head this summer. "
The diesel market already is tight; several analysts believe it is the driving force behind the overall surge in prices. Could the end of the Olympics actually take some of the wind out of that sail?
The Ting report reflects that rising diesel demand. He estimates that in June, year-on-year diesel demand was up 17.1%. Diesel demand stood at 3.13 million b/d, moving across the 3 million b/d market for the first time, the report said.
platts.com |
