Reuters News
BEIJING, Jan 25 (Reuters) - China's oil demand rose a modest 2.6 percent in December, the slowest rate since last January, but enough to bring full-year 2006 growth to nearly 8 percent despite official efforts to curb consumption and boost efficiency.
Beijing is struggling to rein in an economy that last year notched up its fastest growth in over a decade, and the start of strategic stockpiling last summer means few analysts expect more than a modest slowdown in the pace of oil consumption this year.
China used 6.69 million barrels of oil per day (bpd) in December, Reuters calculations based on official data show.
This took full-year implied demand -- net imports plus refinery output, but excluding inventory changes, which are not reported -- to 6.68 million bpd, up 7.6 percent from 2005.
The rise will worry policy makers fretting about China's growing reliance on imported oil, which now accounts for 45 percent of its crude, but may at least mark a return to stable growth after years of volatility that roiled markets.
Poor data and official secrecy about inventories added to worries about demand in the world's number two consumer, which leapt 15 percent in 2004 but grew just 3 percent the next year.
"Markets don't like volatility, like the weird figures we had in 2004 and 2005," said analyst Adrian Loh at Merrill Lynch.
"These figures at least make sense and for 2007 we are looking at it slowing slightly...the biggest unknown is whether they are going to be accelerating strategic oil imports."
China in December took advantage of cheaper oil to add over 12 million barrels of crude to its first set of tanks for emergency supplies. Over 70 percent of their 33 million barrel capacity has now been filled, industry sources told Reuters.
But there has been no official announcement of the rate of fill or when crude will flow into the second set of tanks.
EFFICIENCY, PRICING
With the power shortages that fuelled summer demand in recent years apparently ended by a glut of new capacity, another question mark hanging over demand growth is how much Beijing is willing to sacrifice to meet ambitious efficiency targets.
Driven by concerns about energy security and the economic and social toll of pollution, Beijing has pledged to cut the energy used to earn each dollar of national income 20 percent by 2010.
But this figure actually grew in the first six months of the year, and though officials say it fell in the third quarter for the first time in three years, Beijing has not yet released official figures because they are checking provincial data.
"They are putting in a lot of effort, but good intentions may not produce all the results," said Wenran Jiang, a China energy expert at the University of Alberta.
"Some local people are likely to fake the numbers, because this is heavily political now. To go green and be energy efficient is a buzzword," he added.
The step many international analysts say would offer the swiftest path to trimming demand -- freeing up state-set energy prices -- is one a leadership obsessed with social stability and fearful of inflation has not yet been willing to take.
It has set up a rough link between power and coal prices, but any rises or cuts are decided a few times a year by officials, and Beijing appears to have temporarily shied away from plans to allow diesel and gasoline to follow global markets more closely.
"If oil prices remain where they are there is a possibility they will do it, though if they go back up the government will be more reluctant," said Merrill's Loh.
In December however, falling Asian markets for diesel and gasoline made China's fixed price system more attractive and boosted diesel imports to a two-year high, while Gasoline exports were down nearly one-fifth from the previous month.
(Additional reporting by Jim Bai)