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China Oil Demand Cap May Have ‘Major’ Price Impact, FACTS Says

Plans by China, the world’s biggest energy user, to curb oil demand growth by 2020 will have “major implications” for crude prices and refining margins, a consultant said.

China may allow oil consumption to peak in 2020 at about 13 million barrels a day after which growth will slow to about 150,000 barrels a day, or about 1.1 percent a year, Fereidun Fesharaki, chairman of Singapore-based FACTS Global Energy, said in an e-mailed note today. Consumption grew last year at 6.7 percent to 8.6 million barrels a day, according to BP Plc’s annual energy review.

“China is determined to force a peak in its demand growth by 2020, a key policy issue of priority,” Fesharaki said. The government may require companies to use alternative energy or more fuel-efficient machinery, or introduce rationing to meet its goals, he said.

Oil demand in developing economies, which will account for all the increase next year, will rise 3.7 percent in 2011, compared with 4.5 percent this year, according to the International Energy Agency. China will contribute about one- third of world demand growth, increasing consumption by 420,000 barrels a day, or 4.5 percent. In 2010, Chinese oil demand is forecast to rise 9.2 percent.

Oil product demand in developing Asia may rise by 3.8 percent a year on average to 23 million barrels a day by 2015 from 18.5 million last year, according to the IEA medium-term oil outlook report. China may contribute to almost half of the total demand over the forecast period, the Paris-based agency said.

Crude oil for September delivery dropped 7 cents, or 0.1 percent, to $75.70 a barrel in electronic trading on the New York Mercantile Exchange at 12:35 p.m. Singapore time. Prices are up 9.4 percent from a year ago.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at

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