China's apparent* oil demand in February jumped 16.6% from a year ago to a historic high of around 8.5 million barrels per day (b/d) or about 33.28 million tonnes, according to a Platts analysis of official data just released.
February marked the sixth straight month the world's second largest oil consumer posted double-digit annual growth in oil demand.
Meanwhile, China's apparent oil demand in January was lower at an average 7.75 million b/d, but still 17.6% higher than a year ago.
Average demand for the first two months of the year at 8.1 million b/d was 17.8% above the corresponding period of 2009.
China releases official oil trade and domestic crude production and crude throughput data for January and February together in March because of the long Lunar New Year holiday break, which typically falls in the first or second month of the year.
Crude throughput at Chinese refineries in January and February was up around 23% from a year ago, official data showed.
"Chinese refineries are running full steam, but the country, which also boosted its refining capacity through 2009, appears to be producing far more fuel than what the domestic market is absorbing," said Vandana Hari, Asia news director at Platts. The surplus has to either go into storage or show up as export barrels, she explained.
"News that state giant Sinopec began subsidizing exports by its refineries in February signals an urgency to get rid of stocks, especially if the company didn't want to reduce crude processing rates," said Hari. "It appears that going forward, we could see a continuing strong climb in China's crude imports and a waning appetite for product imports," Hari added.
A revised domestic oil products pricing mechanism adopted by the Chinese government at the beginning of 2009 encourages higher processing rates because it not only guarantees an estimated 5% margin for the refiners, but also factors in crude processing costs. The formula, which tracks international crude prices, prompted five price hikes and three cuts in 2009, but also led to speculative stockpiling of fuel ahead of anticipated increases. It might be tweaked this year, in a bid to make price changes unpredictable, according to news reports.
As refiners lifted their product exports by nearly 54% from a year ago in the first two months of 2010 and China's imports simultaneously dropped 12.5%, net inflow of fuel into the country was down by almost 65% from a year ago.
*Platts calculates China's apparent or implied oil demand on the basis of crude throughput volumes at the domestic refineries and net oil product imports, as reported by the National Bureau of Statistics and Chinese customs.
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