IEA raises China's 2007 oil demand estimate

The International Energy Agency, Paris, has revised upwards its forecast for China's 2007 total oil product demand by 6.1% to 7.6 million b/d due to refining and trade data showing stronger-than-expected apparent demand in the first 2 months.

Eric Watkins
Senior Correspondent

LOS ANGELES, Apr. 13 -- The International Energy Agency, Paris, has revised upwards its forecast for China's 2007 total oil product demand by 6.1% to 7.6 million b/d due to refining and trade data showing stronger-than-expected apparent demand in the first 2 months.

IEA said its projections for Chinese apparent demand in the first quarter have also been revised upward by 300,000 b/d to 7.61 million b/d. The agency also said it lowered its second quarter demand projection by 600,000 b/d to 7.7 million b/d.

According to preliminary data, January's apparent demand increased by 4.1% on an annual basis, IEA said. Apparent demand is defined as refinery output plus net oil product imports adjusted for fuel oil and direct crude burning, smuggling, and stock changes.

The Asian giant's demand increases were driven mostly by naphtha (up 12.4%), gasoline (up 3.3%), gas oil (up 5.9%), and other products (up 27%).

"Following further revisions to last year's monthly data, particularly in fourth-quarter 2006, we estimate that demand in 2006 averaged 7.2 million b/d, slightly higher than in our last report, bringing yearly growth to 6.9%," IEA said.

The agency said January's relatively modest—by Chinese standards—pace of growth is explained by the fact that oil product demand was particularly strong in January 2006, buoyed by Lunar New Year festivities, which prompt a surge in demand, particularly of gas oil as many Chinese citizens travel home.

The 2007 celebrations, by contrast, took place in February. In anticipation, the government ordered refiners to cut gas oil exports in February in order to meet the surge of domestic demand that month.

In late January, the government also reduced jet fuel surcharges for domestic airlines by 17-20% to encourage air travel—the surcharges had been raised in August 2006.

Meanwhile, citing recently released data from the China Electric Power News, IEA said that over the next few years the country is unlikely to see a repeat of its 2004 oil demand surge, when electricity shortages were met mostly by small diesel generators, especially in rural areas.

China expanded its generating capacity by 102 Gw in 2006 to a total of 520 Gw, IEA said. As a result, China's generating margin—the spare capacity available to meet peak demand—is "likely to reach some 10 Gw this summer, compared with [a] 40 Gw shortfall in 2004."

However, IEA said, 90% of China's new power plants are coal-fired, while hydropower accounts for another 9%. It said nuclear and other forms of energy represent less than 1% of China's capacity.

Contact Eric Watkins at hippalus@yahoo.com.

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