Analysis on Domestic Petroleum Market for 2010     

1. Features of the domestic petroleum market in H1

As the Chinese economy kept bouncing back, domestic petroleum demand continued to rise in 2010 - extending a rally that started in March 2009 - though the growth was slowing. This March, the apparent oil demand - domestic crude production plus net imports of crude and oil products - hit an all-time high of 39.272 million tons. Thereafter, month-on-month growth slowed in the following months. In the January-May period, the apparent oil demand stood at 183.078 million tons, up 13.4% from the same period a year earlier. The apparent oil demand showed double digit on-year growth in each month in the first four months of the year, while it added only 2.6% in May from a year earlier.
   The Chinese government will continue adjusting its economic structure and pick up the pace in energy saving and emission reduction and the development of new energy and alternative energy. As the impact of the financial crisis on different oil products varies, the demand mix and growth rate for different oil products also vary.
   Crude demand fluctuated but rose this year, hitting an all-time high in March and showing relatively fast on-year growth. The double-digit growth ended in May, when demand was up 6.6% compared with a year earlier.
   Diesel demand rose but growth rate is declining.
   Gasoline demand fluctuated and rose slightly, showing small on-year growth.
   Fuel oil demand declined year-on-year as a result of economic structure adjustment, energy saving and the rapid development of alternative fuels.
   Domestic petroleum production rose gradually as demand went higher. Monthly crude output has grown at 4% on average from a year earlier to date - something rare in history. Crude production broke the 17 million tons level for the first time in May, reaching 17.153 million tons, up 7% year-on-year. Domestic crude output rose 4.9% year-on-year to 81.596 million ton in the first five months. Crude processed also kept rising, reaching a fresh all-time high of 35.793 million tons in May. However, on-year growth rate fell by month - from 30.8% in January to May's 14.7% - because the monthly basis represented increased trend in the corresponding months last year. Domestic crude processed increased 18.9% from a year earlier to 170.465 million tons in the January-May period.
   In the first five months of 2010, monthly diesel output has shown double digit growth - at 31.4% in January and 12.0% in May; monthly kerosene output growth stayed above 20%, hitting 49.9% in January; fuel oil output also grew relatively fast, but at single-digit pace in April and May; output for gasoline and liquefied petroleum gas grew relatively slowly, with single-digit growth in most of the months.

2. Outlook of domestic petroleum market in H2

There are still many uncertainties in the global economic recovery though world economy is improving and the Chinese economy is expanding relatively fast. The domestic petroleum demand is forecast to reach 440 million tons in 2010, an increase of 7.7% from a year earlier. Crude oil demand would reach 424 million tons - exceeding 4 million tons for the first time - up 9.2% from a year earlier.
   Domestic crude oil output is estimated to reach around 200 million tons in 2010, and crude processed will exceed 400 million tons.  
    Net petroleum imports will reach 240 million tons in the year, of which net crude oil imports will exceed 200 million tons, according to estimates on the demand and production for different oil products.
   The international oil prices are expected to keep fluctuating in a narrow range and the Chinese government will continue to adjust domestic refined oil prices accordingly and timely. The domestic petroleum market will be stable, but competition will be fiercer.

  Forecast for apparent petroleum products demand (thousand tons)
Type        2009    2010 estimate    growth %
Petroleum    408 374     440 000     7.7
Crude oil    388 109     424 000     9.2
Fuel oil    33 946      34 000      0.2
LPG         21 159      21 600      2.0
Refined oil products    220 616     233 000     5.6
    Gasoline    67 049    69 000      2.9
    Kerosene    14 970    16 000       6.9
    Diesel      138 598    148 000     6.8
Source: CNCIC