Energy

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

Chinese oil demand, so long the picture of a ravenous bull, is looking more like a vomiting bear.

PetroChina reported its worst-ever first-half profit on Wednesday. That was mostly due to collapsing oil prices savaging profits in the upstream part of the business.

Here, though, I am more concerned with PetroChina's downstream business; specifically, its domestic fuel sales. These, together with rival Sinopec, account for more than half the market in China and so provide a useful window on demand that I track every quarter for Gadfly (see here and here for the previous two updates).

Here come the charts:

Getting A Flat
Change in combined domestic fuel sales by PetroChina and Sinopec, year over year
Source: the companies
Taking It Slowly
Domestic fuel sales
Source: the companies
Feeling Pumped?
Combined trailing 4-quarter domestic fuel sales for PetroChina and Sinopec
Source: the companies

As you can see, fuel sales have been flatlining for China's two behemoths since late 2014 -- which coincides with the beginning of the oil crash. Excess supply is, after all, a function of demand as well as production.

China's slowing demand is a headache particularly for refiners. Cheaper crude encourages refiners everywhere to process as much of the stuff as they can. But without adequate demand to take their output, that just means the crude-oil glut becomes a refined-product glut. And China is the perfect example of this:

Regurgitating
China's net exports of gasoline, diesel and jet fuel hit a record in July
Source: Bloomberg Intelligence

As seen in steel, aluminum and other commodity products, when China's appetite for fuel slackens, that just means more for everybody else. Drink up.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in New York at ldenning1@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net