China's oil demand recovered about 2% in August from 10-month lows in the previous month as favorable weather after the rainy season helped industrial activity to gather pace, which also prompted the top Asian oil consumer to boost its net oil product imports.
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Market players and analysts expect the upward trend to continue at least until the middle of October, after which industrial and consumer activity will start to slow because of the approaching winter season.
"Demand in September and October will be better as harvest activity and the fishing season will increase demand for gasoil. The week-long National Day holiday in October will also stimulate gasoline demand as more traveling is expected," a refiner from Shandong said.
Total apparent oil demand rebounded to 10.76 million b/d in August from 10.56 million b/d in July, up 1.9% month on month, S&P Global Platts calculations showed.
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Meanwhile, the year-on-year decline also narrowed to 4.3% in August, from 7.1% in July.
The sharp month-on-month rise of 728.3% in net oil product imports to 286,000 b/d also suggested that the country needed more barrels to meet the higher demand in August as throughput fell to a three-month low of 10.47 million b/d because of heavy maintenance.
The National Bureau of Statistics said the recent destocking signaled higher demand.
"More surplus capacities have been eliminated," it added.
Beijing does not release official data on oil demand and stocks.
Platts calculates apparent or implied oil demand by taking into account official data on monthly throughput at Chinese refineries and net product imports. But the official statistics do not capture some crude throughput increase from the new crude oil consumers -- the independent refineries.
In addition, output of off-spec gasoline from the blending pool, which also caters to a significant portion of the demand, is also excluded from the official data.
China's August manufacturing PMI moved to 50.4 from 49.9 in July, beating market consensus and rising to the highest level since October 2014, with value-added industrial production growing 6.3% year on year, compared with 6% in July.
Fixed-asset investment growth was steady at 8.1% in the year to date, unchanged from July but lower than the 9.8% seen in June.
Growth in fixed asset investment and industrial output are related to energy consumption. GASOIL, JET FUEL DEMAND
Apparent demand of gasoil in August was 3.23 million b/d, rising 1.7% from July. It was down 7.2% year on year but the fall was narrower than the 8.8% noted in July.
Meanwhile, China saw the heaviest month-on-month draw on gasoil stocks at 16.81% by the end of August, compared with a 3.53% build in inventory at the end of July, according to data compiled by Xinhua since 2010.
It suggested that actual consumption was higher than implied demand.
"After a heavy stock draw in August, supply of gasoil is a bit tight and we expect the situation to last until the end of October," said an oil products trader from PetroChina Guangzhou.
Transportation accounted for about 80% of the rise in demand for gasoil in China, while agriculture and construction sectors accounted for the rest, said Qian Xingkun, vice president of CNPC's Economics and Technology Research Institute.
Over the first eight months, road traffic turnover rose 3.8% year on year, according to the National Development and Reform Commission.
Jet fuel demand gained 8.4% year on year to 753,000 b/d, stronger than the average demand growth of 7.5% year on year in the first eight months, despite edging down 1.6% from July.
Latest data from the Civil Aviation Administration of China showed that overall aviation traffic turnover continued to grow, rising 12.6% year on year in July, although it was slower than the 14.1% growth posted in June. In the first seven months, turnover increased 12.5% year on year. GASOLINE DEMAND
Apparent demand for gasoline fell 1.3% year on year in August to 2.7 million b/d, which was also lower than the average of 2.77 million b/d for the first eight months.
But analysts said actual demand growth was probably in the single digits if stock changes and blended gasoline are taken into account, in addition to the data on the barrels from refineries that NBS released.
Gasoline stocks at the end of August retreated 1.55% month on month after a 2.2% decrease at the end of July, according to Xinhua.
"Demand continued to be brisk in August because of high temperatures and more travel by students in the summer vacation," Xinhua added.
It is hard to tell how many barrels of blended gasoline flowed into the domestic market due to the absence of official data. But sales of imported mixed aromatics, which is mainly used as a blending material for gasoline, normally gives an indication of demand.
"We sold out imported mixed aromatics faster in August than in the previous months. Demand has been strong since August," said a Guangzhou-based trader.
China's imports of mixed aromatics surged 125% year on year to 189,100 b/d in August, data from the General Administration of Customs showed. About 3 barrels of mixed aromatics are needed to blend 10 barrels of gasoline.
Gasoline demand also found support from a 25% year-on-year rise in sales of fuel-guzzling sport utility vehicles, which jumped 44.3% year on year in July, data from the China Association of Automobile Manufacturers showed. LPG, NAPHTHA DEMAND
LPG demand recovered to double-digit year-on-year growth in August, rising 19.4%, compared with 9.3% growth registered in the previous month.
LPG demand of 1.52 million b/d in August was up 2.7% from July and slightly higher than the average of 1.51 million b/d over the first eight months.
After destocking in the previous months, buyers returned to the market in August to replenish stocks amid higher demand from propane dehydrogenation plants, market sources said.
This also drove up the country's LPG imports in August by 22.4% year on year and 17.4% from July to 515,000 b/d.
Meanwhile, China's Oriental Energy and Hebei Haiwei plan to startup their newly built PDH plants next month and the end of the year, respectively, which will also push up the country's propane demand.
However, apparent demand for naphtha in August fell 18.2% from July and 0.5% year on year to 859,000 b/d, which was also lower than the average of 975,000 b/d over January-August.
The retreat was mainly attributed to a 35.7% year-on-year and 10.5% month-on-month fall in naphtha imports.
Inflows were mainly used as feedstock to produce ethylene, output of which fell 8.1% year on year and 4.8% from July to 1.39 million mt.
Looking forward to the coming months, analysts said that demand was expected to rebound, forcing China to raise imports by the end of 2016.
"We expect more new reformer capacity to be online, which will need to be fed with naphtha to crack gasoline," said a Shanghai-based analyst with an international trading house.
--Oceana Zhou, firstname.lastname@example.org --Sambit Mohanty, email@example.com --Edited by E Shailaja Nair, firstname.lastname@example.org