China's fuel consumption to grow slowly in 2009

China's fuel consumption is expected to be anaemic in 2009 as the global crisis weighs on domestic economic growth, the National Development and Reform Commission said on Wednesday.

China's oil demand has been shrinking since November as annual economic growth slowed sharply to only 6.8 percent in the fourth quarter from 13.0 percent for the whole of 2007.

"Influenced by a mix of factors, there will be fairly big uncertainties in the supply and demand of domestic refined oil products," the commission said in a report on its website (www.ndrc.gov.cn).

"We expect 2009 fuel oil consumption growth rate to be at a fairly low level and consumption in the first half of this year will be lower than for the same period last year," it added.

The top economic planner also said that following various measures to expand investment, boost domestic demand and promote growth, fuel consumption will tick up and the supply glut will be eased.

China's apparent oil demand fell for a second month in December, dropping 5.5 percent from a year earlier as refiners cut output at the fastest pace since 2001.

The figure pointed to an accelerating decline in consumption in the world's No. 2 oil-consuming country, after implied demand fell by 3.2 percent in November, the first drop in nearly three years.

The slow demand resulted in a build-up in refiners' stocks, so they have to cut operations to deplete inventories.

Chinese commercial oil product stocks dropped to about 10 million tonnes at the end of January from a record high of 12.6 million tonnes at the end of last year, an industry source familiar with the situation told Reuters on Wednesday.

Demand estimates for January and February will not be available until mid-March, when China's Statistics Bureau releases output data for those months. But trade figures for January showed net imports of oil products slumped by 22 percent from December.

Sinopec Group had asked eight of its refineries to prepare for exports of refined oil products in March, a Chinese newspaper reported on Wednesday, suggesting its concerns over a domestic fuel surplus at a time of more capacity coming online and sluggish demand.

The government also announced last week that it plans to build state fuel reserves to enable it to balance oil demand and supply in the future.