MTECHTIPS

MTECHTIPS:-China Crude Oil demand to stage modest recovery: Barclays

Barclays expects China’s oil demand to stage a modest recovery on the basis of stabilised margins, healthier product stocks and gradual improvements in underlying macro activity. Although downside risks remain, China’s demand troughed earlier in the year and is likely to rise modestly.China’s apparent oil demand, calculated by throughput and net product imports, rose 9% y/y, to 9.7 mb/d, in September after months of sluggish growth.The uptick took the YTD average to 9.3 mb/d and pushed demand up 220 kb/d for the year. In the first eight months of 2012, apparent demand averaged 9.25 mb/d and hovered around the 9 mb/d mark from June to August, making this the slowest period of growth in years. The muted demand was particularly puzzling when juxtaposed against strong crude imports, which rose 530 kb/d in the January-July period from a year ago.Lacklustre demand earlier in the year was a result of both the slowing economy, which cut industrial demand, and refiners’ deliberate efforts to destock products. As product stocks are now back to historical averages and margins have improved, demand may have bottomed out in the summer and now appears on the path to modest recovery.