China fuel stocks fall 15% as demand recovers

BEIJING – Fuel inventories held by China’s top refiners fell nearly 15 per cent in March, the first sharp decline in over two years, as rising demand lifted sales by more than a fifth from February, a paper reported yesterday.

The stockdraw, reported by the Beijing News citing industry figures, may have also been aided by extra buying by hard-hit independent fuel distributors, but will add to signs including rising refinery runs and economic indicators that the world’s No. 2 oil consumer is beginning to pick up speed again.
Refined fuel stocks held by the main two state oil refiners CNPC and Sinopec fell 14,7 per cent in March, according to data from the China Petroleum and Chemical Industry Association (CPCIA). Sales rose by 21 per cent versus February, it said, an increase likely due in part to the longer month of March.
The paper did not give any specific figures, but based on the association’s end-February stocks reported last month at 14,85 million tons, the end-March level would be about 12,67 million tons, equivalent roughly to two weeks of consumption.
‘It’s major destocking for the state firms…and if you look at real demand, the auto sector is definitely responding to the government’s stimulus policy,’ said Yan Kefeng of Cambridge Energy Research Associates in Beijing.
Separate data reported by China OGP, a newsletter run by Xinhua, had flagged a small decline in fuel stocks at end-February, when gasoline fell 2,7 per cent to 31,9 million barrels and diesel dipped 0,2 percent at 53,7 million barrels, slipping back from record highs touched in January.
Domestic new car sales, which had slowed last year to its lowest annual rate in more than a decade, rose 10 per cent in March over a year earlier to a record high of 772 400 units.
While some of the apparent recovery in China’s industrial sector and raw materials demand appears built on hope for better times rather than a real pick-up in consumption, the inventory figures provide the most compelling evidence of rising demand.
Figures last week showed China’s domestic refinery output last month rose to the highest in five months and crude imports hit their second-highest on record on a daily rate.
But some analysts cautioned that there may still be distortions in the data, including the possibility of increased buying by the country’s hundreds of independent oil distributors following a 3-5 percent pump price increase last month.
‘Business is fairly good for us independents as the government now provides 100 yuan per ton wholesale margin and 300 yuan for retailing,’ Zhao Youshan, head of China Fuel Distribution Association, a body representing independent dealers, told Reuters last week.
While some Chinese publications and industry groups have begun to report sporadic fuel inventory figures from state energy firm CNPC and Sinopec, which were previously considered state secrets, reliable nationwide figures that including stocks held by the hundreds of independent oil dealers remain elusive.
Monday’s data suggest China’s oil majors are finally succeeding in paring back oil inventories that had doubled in the run-up to last August’s Olympics, and then remained stubbornly high as a global recession cut deep into demand.
Refiners have cut back crude imports, scaled back output and boosted fuel exports to combat brimming inventories, which analysts said were beginning to strain capacity.
The Beijing Times report did not provide breakdowns. The association normally tracks gasoline, diesel and kerosene.
-Nampa-Reuters