|As China economy brakes, oil demand goes in reverse
|BEIJING (Reuters) - China's once insatiable appetite for oil has choked.
An abrupt economic slowdown has corroded the machinery of China's economy, while stubbornly high fuel prices have forced drivers off the road. Crude imports are falling, fuel exports have resumed and once flat-out refiners are shutting down.
Demand from the world's second biggest consumer of oil after the United States, one of the main catalysts that launched oil's rally six years ago, likely contracted for the first time in three years last month, data due next week is expected to show.
Analysts say that is not an anomaly. A full-year decline in consumption may loom next year, even if the economy continues to expand at 8 percent or more as expected.
"The bottom line: China's demand growth is expected to be rather dormant for the coming quarters as it battles both global and domestic economic slowdowns," said independent analyst Paul Ting, who estimates demand fell 1.2 percent year-on-year last month.
Data on refinery processing due from the National Bureau of Statistics on Monday is expected to show reduced production rates last month as weak end-user demand left fuel inventories swollen, months after a pre-Olympic stockbuilding binge.
A Reuters survey of 12 top Chinese refineries found they planned to cut production further in December to the lowest for 20 months; top refiner Sinopec has said it will cut crude imports by one tenth in the fourth quarter.
Separate figures expected from the customs office should confirm earlier Reuters estimates that China skipped diesel and gasoline imports in November, the same month last year in which it was starting to rev up a sustained buying spree.
The International Energy Agency affirmed this week its forecast for China's oil demand to rise by 3.5 percent in 2009, slowing from an estimated 5.3 percent this year, although it warned that further downgrades were possible.
Contracting Western demand has already triggered a $100 fall in oil prices, and analysts say crude could slide as low as $30 as the crisis spreads, doing more damage to emerging economies that were once thought partly immune from Western woes.
China's economy only began sputtering noticeably after the Olympics, just as refiners began to think about offloading the fuel the government had told them to hoard ahead of the Games.
Since then economic growth expectations have screeched into single digits and analysts at Goldman Sachs say oil demand growth could be "on the cusp of a sharp deceleration," with November's anemic crude oil imports pointing the way down.
"On net, we expect Chinese demand to decline by 200,000 thousand barrels per day in 2009," Goldman said in a report on Friday, a far shallower decline than in the United States or Japan but an abrupt turnaround for a country that has contributed a third of the global rise in oil demand since 2003.