March 22, 2010 / 4:21 AM / 10 years ago

UPDATE 1-China oil demand rise second fastest, inventories drag

* Feb demand up 19.4 pct on yr, 2nd fastest rise on record

* Demand buoyed by record crude runs, surge in fuel imports

* Real demand growth discounted by hefty stock rise

* Naphtha leads growth

By Chen Aizhu

BEIJING, March 22 (Reuters) - China’s implied oil demand rose 19.4 percent in February over a year earlier, the second fastest rise on record fuelled by record refinery output and a surge in net fuel imports, but real demand growth has been undercut by swelling stocks.

China, the world’s No. 2 oil user, consumed 8.65 million barrels of oil per day last month, a rise of of 9.4 percent or 604,000 bpd versus January, according to Reuters’s calculations using official data released on Monday.

The country also returned to being a net fuel importer after two months as a net fuel-seller, as exports of gasoline and diesel eased sharply and imports of fuel oil and naphtha, rose strongly. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

(For a table of China’s Feb oil demand: [ID:nTOE62L01I])

Graphic on oil demand:

here

Graphic on gasoline, diesel, fuel oil trade:

here

here

here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

The data excluded fuel inventory changes, which China rarely reports. However, an industry official with access to inventory data said diesel stocks jumped 23 percent in February from January, suggesting real demand growth was not as robust as the apparent demand figures showed. [ID:nTOE62A07E].

“The trend of demand recovery is becoming clearer,” said one fuel marketing official with top refiner Sinopec Corp (0386.HK). “But the surplus of diesel and gasoline is going to stay, simply because refinery production is still rising faster than fuel demand.”

While refiners boosted their crude throughput last month to an all-time high of 8.32 million bpd, instead of going to sales, some 530,000 bpd of diesel ended up in the tanks of top refiner Sinopec and PetroChina (0857.HK), according to Reuters calculations based on the industry stock figures.

Traders have said fuel consumption has staged a marked rally since the beginning of March, as industries resumed normal operations after the February holiday lull and as independent fuel dealers started to replenish stocks in the hope that Beijing will raise retail fuel prices for the first time in four months.

NAPHTHA LEADS

Of the main refined fuels, demand for naphtha grew the fastest, up 71 percent in February versus a year earlier. Since late 2009, China has started up two 1 million tonne-per-year steam crackers that have spurred demand for the petrochemical feedstock.

A third big cracker is due on line at the end of March at Sinopec Corp’s Zhenhai unit in eastern China that is set to lift naphtha demand further.

Analysts said gasoline demand, which exceeded the growth of diesel in 2009 for the first time in years, is likely to stay on the boil as Beijing extends its policy incentives to boost purchases of smaller vehicles and spur rural demand for cars.

China’s new passenger car sales rose 55 percent in February from a year earlier, following a dizzying 116 percent rally in January. [ID:nTOE62709A]

Reporting by Chen Aizhu and Jim Bai; Editing by Ken Wills

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