Government statistics show a sharp drop in China's oil demand as the nation's economy continues to slow.
China's oil demand declined by 1.9% year-on-year in June to 36.84 million metric tonnes, its lowest since 2009, despite the overall economy continuing to grow. According to Platts, the New York-based energy and metals analyst, government data showed demand in June fell to an average of 9 million barrels per day, compared to 9.18 million barrels a day in the same period last year.
While the near 2% drop seems steep, industry insiders like Song Yenling, Platts' senior writer for China, were already anticipating a slight dip. Song claims he has been “expecting the drop to come because demand for fuel will definitely decline when economic growth slows”.
Nonetheless, oil demand did show a slight increase in the first half and some analysts are predicting demand will recover in the Third and Fourth Quarter. Li Li, a manager at ICIS C1 Energy, predicts that Third Quarter growth will stabilize at around 2-4% year-on-year as the government tries to get the slowing economy back on track.
China's Second Quarter GDP growth shrank to 7.6%, 0.5% lower than Q1 - its lowest point in the past three years, with lower-than-average factory output and energy useage also affecting the possibility of a speedy recovery. As a result of the slowdown, China's four biggest banks released a 50 billion yuan ($7.9 billion) stimulus package to help boost the economy, however the direct affects of the cash injection are yet to be seen.