China's apparent oil demand in June was 36.92 million metric tons (mt), or an average of 9.01 million barrels per day (b/d), as a heavy maintenance programme during the month curtailed consumption, according to Platts' analysis based on recent statistics released by the Chinese government.

June's demand of 36.92 million mt marked a slim rise of 0.5 per cent from the same month a year ago. This year-on-year increase of 0.5 per cent was drastically slower than year-on-year growth rates of between 8 per cent and 15.8 per cent recorded between January and May 2011, and June's oil demand at 9.01 million b/d was just marginally higher than the previous low of 8.95 million b/d in October 2010.

"June's oil demand growth was the lowest in over two years as a number of Chinese refineries decided to shut their plants for repairs and maintenance last month because of lofty global crude oil prices, and output declined after an easing in a recent domestic diesel supply crunch," said Calvin Lee, senior writer, China, for Platts, a leading global energy, petrochemicals and metals information provider.

A recent study by Deutsche Bank showed that turnarounds peak in June-July and are roughly 465,000 b/d heavier year-on-year.

In June, Chinese refineries processed 35.56 million mt of crude oil, or an average of 8.69 million b/d, the lowest daily processing volume in nine months. In September 2010, the country had processed 34.91 million mt of crude oil, or an average of 8.53 million b/d.

Net product imports were 1.36 million mt, or an average of 0.32 million b/d. This is up from 930,000 mt in May as Chinese companies reduced exports to build domestic inventories.

Analysts said that hefty diesel imports have not materialized as initially anticipated, despite reports of severe power shortages. They note that China, so far, has been able to replenish diesel inventories with domestic capacity and by curbing exports.

Recent government data also suggests that domestic oil consumption has softened somewhat and that the diesel supply crunch has dissipated in recent weeks, boosting inventories.

Figures released on July 18 by the country's economic planning agency, the National Development and Reform Commission (NDRC), showed that China's apparent consumption of gasoline, gasoil and jet fuel in June softened by 1.2 per cent from May to 19.94 million mt. This is the third consecutive month that oil demand has fallen, after reaching a peak in March.

Inventories for refined products at the end of June grew by nearly one million mt from the same period a year ago, which was a "normal level," the NDRC said, though it did not provide the total stock figures.

Still, analysts are expecting Chinese oil demand to rebound for the rest of 2011, especially in the fourth quarter.

"With the peak summer refinery turnaround period ending in August, crude runs will likely soon recover. Also, if history of the past two years is any indication, China's oil consumption could ramp up in the fourth quarter," said Lee.

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