Oil demand declines in June for 1st time

China's oil demand fell for the first time in three years in June with a 1.9 percent drop year-on-year to 36.84 million metric tons, or an average of 9 million barrels a day, according to analysis from New York-based energy and metals information provider Platts on Wednesday based on government data.

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The country's daily oil demand in June fell 178,400 barrels a day from 9.18 million barrels a day in the same period last year, which is the first drop since a 2 percent decrease in the first quarter of 2009 in the wake of the global financial crisis, Platts said.

On a daily basis, apparent oil demand last month was at its lowest since September's figure of 8.95 million barrels per day.

Apparent oil demand is calculated on the basis of crude throughput volumes at domestic refineries and net oil product imports reported by the National Bureau of Statistics and Chinese customs, Platts said.

"Industry insiders have been expecting the drop to come because demand for fuel will definitely decline when economic growth slows," said Platts' senior writer for China Song Yen Ling.

China's apparent oil demand increased 0.3 percent to 9.35 million barrels a day in April and 0.5 percent to 9.39 million barrels a day in May.

However, the drop in June led the second quarter's daily oil apparent demand to drop 0.4 percent compared with the same period last year.

"Oil demand had a slight increase in the first half, and the one-month drop cannot show the whole picture of national demand in the long run," said Li Li, senior information manager at energy consultancy ICIS C1 Energy.

According to Platts, China's average daily oil apparent demand in the first half was 9.45 million barrels, up 1 percent year-on-year.

Li estimated that demand in the third quarter will stabilize at around 2 to 4 percent growth year-on-year.

"Since oil prices fell in May, the fuel markets, including coal and oil, have both suffered a period of high inventories, but the situation will improve," she said.

"Meanwhile, fuel prices will be uncertain in the second half because of both political and financial influence.

"In the second half of the year, it's going to be a tussle between the slowing economy and the government's efforts to get things back on track," Song said.

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