Sales of Diesel in China Shrink on Slower Economic Growth

Published Date : Jul 21, 2015

Sales of diesel in China declined in June amid a rebound in prices of oil and slow economic growth, according to two state refining sources. This has threatened to add on to the glut of global fuel as the nation usually exports all that it fails to absorb.

The contraction in the diesel demand in China, which is a measure of its industrial activity, brings to the fore the challenges that the world’s second largest economy faces as economic growth slips to its lowest pace in 25 years.

Oil prices that had dipped as low as 60 per cent from a peak in mid 2014 drove the demand for fuel in China in the first four months of this year. However, sources have said that sales of diesel dropped last month and demand for gasoline slumped owing to low car sales.

Market analysts say that tumultuous Chinese equities could possibly restrict the appetite for luxurious goods such as cars and thereby reduce the use of fuel.

Suresh Sivananda, Wood Mackenzie’s principal analyst for refining and chemicals said that the latest slump in the equity market in China is a matter of concern and poses as the downside of the oil demand outlook in China.

From a seven year high in mid June, Chinese shares have dropped by nearly a quarter. This has been a rebound from a drop of over 30 per cent, which came as a result of investors losing faith in the stock exchanges of the country.

Wood Mackenzie predicts that China’s use of diesel will rise by a mere 0.1 per cent in the latter half of the current year as against the 2.1 per cent in the previous half. The consultancy said that growth of gasoline demand could diminish from 8.8 per cent to 6.3 per cent during the same period.