China’s oil demand growth accelerated to 13.5 per cent in May, nearing the explosive rate of 2004, as refiners boosted output and curbed exports ahead of a domestic price increase to meet peak summer demand.

The rebound from last year’s tepid 3 percent rise appeared in full swing, but some analysts cautioned that the second half of the year could see a slowdown as Beijing moved to cool down its economy and consumers feel the impact of higher pump prices.
Apparent oil demand leapt 13.5 per cent last month from the year-ago level to 6.5 million barrels per day (bpd), according to Reuters calculations based on official data.
That was the fastest rate since 2004, when overall demand grew around 15 per cent, and exceeded last month’s 10.8 per cent rise as imports of fuel oil surged and gasoline exports slumped, both indicators pointing to increased domestic needs.
Some analysts said the figures were also lifted by refiners stockpiling oil in hopes for more profitable sales later. Apparent demand is based on refinery runs plus net product imports, but does not account for changes in inventory levels.
“Oil companies were building stocks before the May price increase. And May is the beginning of summer, when oil use by both agricultural and industrial sectors starts to peak,” said Wu Jun of EJIN Business Consultants Co Ltd.
China raised gasoline and diesel prices recently by a bigger-than-expected 10-11 per cent, but the increase still left domestic rates well below international costs, deterring additional imports that could have boosted demand data even more.
The International Energy Agency (IEA), which expects China’s demand to grow by 5.7 per cent this year, said earlier this month that the pump price rise might help improve short-term demand indicators, but could dampen growth in the longer term.
The surge in May data raised apparent demand growth to 6.5 per cent in the year to date, the Reuters calculations showed.
EJIN’s Wu warned that the robust pace may ease in the second half as Beijing’s tightening policy to rein in runaway fixed-asset investment, including a rise in benchmark lending rates and an increase in the reserve requirement ratio, was expected to eat into energy demand.
Heavy industries such as steel and building materials are leading energy consumers.
“We are anticipating oil demand growth to slow down in the second half because of all these macro controls,” said Wu.