This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Chinese Oil Demand Forecast Slashed

Stocks in this article: SHIPTRCEO

BEIJING (TheStreet) -- Airline travel and SUV sales are propping up flagging oil demand in China, which according to a new forecast will increase a mere 0.3% year-on-year in 2014 after rising 2.9% last year.

Indeed, the forecast compiled by China's largest investment bank suggests barrel-per-day demand for all refined oil products would decline this year if not for a rising class of consumers who like to fly and drive big vehicles.

China's slowing economy and industrial restructuring are crimping demand for diesel, naptha and other products excluding jet-fuel kerosene and gasoline, said the China International Capital Corp. (CICC) report, which has wide implications for China's state-owned oil companies Sinopec (SHI), PetroChina (PTR) and China National Offshore Oil (CEO).

"We believe diesel and naphtha's reliance on industrial activities will see their demand continue to fall (in 2014), while gasoline and kerosene's heavy exposure to consumer spending should see their growth remain solid against the backdrop of ongoing adjustments to China's economic structure," CICC analyst Guo Chaohui told TheStreet in an email Monday.

CICC's prediction of a mere 0.3% rise for refined oil demand represents a significant cut from last year's consensus forecast of 2% to 3% growth for 2014, Guo said.

But it's in line with first-quarter 2014 data, which showed demand plunged to 10 million barrels a day from 10.6 million in the fourth quarter of 2013. It was also down from the 10.3 million barrels per day sold in the first quarter of 2013.

Guo said a "slower growth pace" for oil in China "has been verified by the 1Q data."

About 40% of last year's average daily consumption of 10.5 million barrels was used by the industrial sector, including chemical factories. Diesel fuel accounted for 35% of the demand, gasoline 21% and kerosene the rest.

CICC predicted diesel fuel demand would fall this year to 3.45 million barrels a day from last year's 3.49 million barrels, in part because rising coal imports have cut into the need for shipping domestically mined coal by railroad, using diesel locomotives. Moreover, the report said, companies are replacing diesel trucks with models powered by liquefied natural gas, or LNG.

The healthiest oil sector is the gasoline market, which Guo said is growing because consumers are buying bigger vehicles. The government's decision to phase-out subsidies for small, fuel-efficient cars has accelerated the trend since last year, he said.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,814.94 -2.96 -0.02%
S&P 500 2,067.03 -2.38 -0.12%
NASDAQ 4,758.2520 +3.36 0.07%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs