Asia Pacific

China misreads its oil demand

Oil demand dipped in 2005

Chinese government officials seem to be the only people these days who don't think the country's oil demand is barreling ahead.

The prospect of misreading oil demand growth in the world’s second-biggest oil consumer is daunting for the oil market - and for good reason.
An unexpected demand surge from the power-generating sector in China in 2004 played havoc with forecasts which were, in some cases, 60 per cent too low, and sent crude oil prices soaring.
For 2005, global oil market analysts peg the growth rate in the world's second-biggest oil consumer at anywhere from 3 per cent to 6 per cent.
Strong Chinese demand is a big part of why oil prices have galloped ahead by 82 per cent since 2003 and hover near $64 a barrel now.
So when China’s official Xinhua news agency quoted the government's top planning agency as saying that the country's oil demand actually dipped in 2005, the matter was cause for pause for China-watchers globally.
With little elaboration, the report said the National Development and Reform Commission put apparent consumption at 317.67 million tons in 2005, down 0.3 per cent from a year earlier.
At the Paris-based International Energy Agency, where analysts are putting final touches on their widely watched Oil Market Report, the report met with a large dose of skepticism.
Jeff Brown, an oil demand analyst at the IEA, the energy watchdog of the major industrialized countries that form the Organization for Economic Cooperation and Development, said the numbers don't add up with what had been known previously.
Brown said the report ‘doesn’t appear to be consistent with the data we have’ for crude oil output and imports from China National Petroleum Corp and Sinochem, two of the biggest state-run oil companies.
The IEA's December oil-market report projected that Chinese oil demand would show a healthy 3.1 per cent growth rate in 2005.

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