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:
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:
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.
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