Chinese oil demand growth slows again-IEA
China's rapid oil demand growth turned negative in April as Chinese refiners ran down stocks and cut petroleum product imports, the International Energy Agency said on Friday.
For the second successive month the IEA, in its oil market report, cut its 2005 forecast for China's oil demand growth.
But the agency said world demand is being supported by continued strength in U.S. and developed Asian economies, leaving its forecast for 2005 global demand growth little changed at 1.78 million barrels a day, 2.2 percent.
The IEA now sees 2005 China growth of 460,000 barrels a day, 7.1 percent, down 10,000 bpd from last month's report and off from last year's 860,000-bpd, 15.4-percent growth.
The reduced forecast follows a 2.8 percent decline in apparent Chinese demand growth in April versus April 2004, when demand rose by 18.9 percent year-on-year.
Chinese refiners cut oil product imports sharply in April, although crude imports continued to rise.
"A part of the decline in product imports can be traced to the government policy of limiting increases in the price of key products such as diesel," said the IEA.
"This has discouraged imports of internationally priced products, encouraged exports and limited the incentive of small 'teapot' refineries to refine relatively high-priced fuel oil imports.
In addition, power prices have been set at levels which discourage the use of fuel oil, the IEA said.
But demand growth may accelerate again in the second half of the year.
"Chinese demand growth is projected to recover in the second half of 2005, partly because the 2004 baseline is lower, but there is downside risk to our projection," the agency said.
That assumption means the IEA revised higher its forecast for global demand growth in the second half of the year.
While second quarter world demand growth was 220,000 bpd slower than expected at 1.36 million bpd, growth in the second half is likely to be more than previously thought, the IEA said. Projections for world third and fourth quarter growth were revised higher by an average 200,000 bpd to growth of 2.1 million bpd and 1.9 million respectively.
That means higher demand for OPEC crude in the fourth quarter at 29.6 million bpd, an upward revision of 300,000 bpd from last month's report.
OPEC output in May was estimated at 29.26 million bpd, off 55,000 bpd because of lower Iraq, UAE and Venezuela output.